Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — TRADE

European Economic Community (Council of Ministers)

Mr. John Evans: asked the Secretary of State for Trade when he expects to meet his European Economic Community colleagues.

The Secretary of State for Trade (Mr. John Nott): The next meeting of the Foreign Affairs Council will be on 17–18 March and either my hon. Friend or I will attend.

Mr. Evans: When the Minister attends the meeting with his EEC colleagues, will he explain to them that the arguments in favour of protecting certain key British industries by means of selective import

controls are growing apace? Will he emphasise that unless those arguments are recognised, grave consequences will follow that will affect the future of the EEC?

Mr. Nott: The arguments for selective import controls are not growing apace, although the demand may be increasing.

Mr. Brocklebank-Fowler: When my right hon. Friend sees his colleagues in the Community, will he mention the unfairness that arises from Britain's contribution to the European development fund? Will he bear in mind that Britain contributes 18 per cent. of the fund in return for 7 per cent. of the contracts, while the French contribute 18 per cent. but succeed in obtaining more than 30 per cent. of the contracts.

Mr. Nott: I think that perhaps that question should be answered by my hon. Friend the Minister of State, Foreign and Commonwealth Office. However, I shall endeavour to answer it. The distribution of the European development fund is very unsatisfactory. We receive about half of the amount that we put in. The French receive double, and the Germans come out about neutral. I am unhappy about the way in which the funds are deployed. However, in the last resort British industry must bid for those funds as part of its export effort. I agree with the sentiments behind my hon. Friend's remark.

Mr. Winnick: Has the Secretary of State noticed that even The Guardian,


with its liberal traditions, has come out more or less in favour of some form of import control for manufacturing industry? Is it not true that if there is to be any long-term future for our manufacturing base some form of selective import control is vital?

Mr. Nott: I would not necessarily define the sentiments expressed by The Guardian as "liberal". Some of its sentiments are illiberal. To a certain extent liberalism stems from the Manchester school I am not sure that all the attitudes expressed by The Guardian stem from that. Selective import controls do not have anything to offer this country. About one-third of our GNP is derived from exports. We should not follow the route of selective import controls.

Mr. Alan Clark: When my right hon. Friend meets his European colleagues, will he bear in mind the incontestable fact that in 1970 we had a surplus of £150 million in trade on manufactured goods, but that last year we had a deficit of £2½ billion? Does he not agree that whoever may be benefiting from this trade, it certainly is not us?

Mr. Nott: I assume that my hon. Friend is referring to the European Community. We expanded our exports to the EEC last year at approximately double the rate at which we expanded exports to the rest of the world. That is a useful achievement. Trade is multilateral. Of course, we shall have deficits with some parts of the world and surpluses with others. We must improve our performance with our trading partners in the EEC.

Advertising and Price (Relationship)

Mr. Peter Lloyd: asked the Secretary of State for Trade what conclusions emerged from the study initiated by the last Administration and the Advertising Association into the relationship between advertising and price.

The Under-Secretary of State for Trade (Mr. Norman Tebbit): The Advertising Association commissioned and published a study on advertising and price in May 1979, which has now been largely overtaken by the proposals in the Competition Bill for strengthening competition and reducing Government intervention.

Mr. Lloyd: Does my hon. Friend agree that investment in advertising is no different

in principle from investment in production and distribution? Does he further agree that goods and services can benefit their producers only when they are sold, and that advertising is therefore an important and often essential part of that process?

Mr. Tebbitt: My hon. Friend is right in many cases. Advertising may well play an important part in increasing competitiveness. That is not to say that all advertising is either effective or good, but it should not necessarily be seen as bad.

Advertising Control

Mr. Garel-Jones: asked the Secretary of State for Trade what action he intends to take in the light of the working party's report on advertising control.

Mr. Tebbit: My right hon. Friend is considering carefully the domestic, international and legal implications of the report's recommendations in consultation with interested ministerial colleagues.

Mr. Garel-Jones: Does my hon. Friend agree that the principle of self-regulatory control in advertising is probably good? Is he certain that there is a need to alter the present practice, apart from the requirement to comply with a particularly meddlesome EEC directive? Why do we not merely veto it?

Mr. Tebbit: I am not certain that we need to alter the self-regulatory control arrangements in the United Kingdom. The report's principal recommendations claim to strengthen and maintain the ASA arrangements rather than undermine them. We shall consider the report carefully, but we have no intention of moving suddenly to the projected European system of heavy-handed statutory control.

Mr. John Fraser: Does the hon. Gentleman accept that in essence, all the recommendations are for a statutory back-up of the self-regulatory system? Will he accept that we could easily accommodate the domestic demand for a back-up system and an amended directive in the same piece of legislation? Will that be forthcoming in the next Session?

Mr. Tebbit: As I explained to my hon. Friend the Member for Watford (Mr. Garel-Jones), we are considering the implications of the report. The hon. Gentleman is correct. It would be possible


to consider the Commission's proposals' which can be reconciled with the present United Kingdom legal and institutional arrangements in advertising in the light of a statutory back-up to the ASA approach, and we are doing that.

Mr. Watson: Does my hon. Friend agree that the report essentially gives a clean bill of health to the self-regulatory system of the advertising industry and that the proposals for change are quite slight? Will he inform the House of the cost of the working party and the report?

Mr. Tebbit: I cannot tell my hon. Friend how much it cost. He is correct that, in general, the report is not excessively critical of the present position, although, as ever, there may be room for improvement. I shall try to discover a clear figure for the cost and let my hon. Friend know.

Market Entry Guarantee Scheme

Mr. Dorrell: asked the Secretary of State for Trade what is the total sum the British Overseas Trade Board has agreed to contribute towards eligible costs under the market entry guarantee scheme; how much of this has been recovered; and what proportion of the difference he estimates will be recovered in future years.

The Minister for Trade (Mr. Cecil Parkinson): As at 29 February the British Overseas Trade Board has agreed to advance up to £3·5 million under the market entry guarantee scheme to help finance eligible overhead costs associated with ventures to develop export markets. So far £915,000 has been paid out and £188,000 recovered in levy and guarantee payments. I am hopeful that the balance will be recovered in due course.

Mr. Dorrell: I thank my hon. Friend for that answer, but can he indicate to the House when he expects to be in a position to make an announcement about the long-term future of the scheme? Does he accept that it is a valuable weapon in our fight to win export orders, and that the relatively slight cost is even smaller when compared with the export support given to competing industries in other developed countries?

Mr. Parkinson: I believe that my hon. Friend is right. It is a valuable scheme.

As he knows, the Government's entire export promotion services are under investigation. We hope to make an announcement about the future of the scheme in the very near future.

Import Controls

Mr. Norman Atkinson: asked the Secretary of State for Trade if he will consult the Trades Union Congress about the necessity to regulate imports into the United Kingdom.

Mr. Nott: I am always willing to have discussions with the TUC, but there is no question of introducing any general regulation of imports into the United Kingdom.

Mr. Atkinson: Is the Secretary of State aware that the majority of trade unions in manufacturing industry conclude that it is necessary to introduce a planned regulation of world trade in order to increase its volume? Is he further aware that if the Government refuse to intervene the trade unions will be compelled to take action, because of the rate of destruction of jobs in the country, and introduce selective industrial embargoes on certain goods coming into the country? Will the right hon. Gentleman reconsider his answer and introduce planned regulations in order not to force trade unions to take action?

Mr. Nott: I am not sure how the hon. Gentleman or the TUC will set about planning world trade, as he puts it, from London. The selective controls which the hon. Gentleman mentions would put up prices and thereby raise costs. They would divert goods from the export market to the home market, which would damage our balance of payments. If they succeeded, which I do not believe they would, they would further strengthen the pound and erode profit margins. They would also provoke retaliation from other countries. I do not believe that the hon. Gentleman's proposed policy stands up to serious argument.

Mr. Forman: Will my right hon. Friend accept that I agree with all the arguments that he put forward and believe that the suggestions of the hon. Member for Tottenham (Mr. Atkinson) are lunatic and self-defeating? Is my right hon. Friend aware that the American response to tentative efforts by


the EEC over synthetic fibres indicates the dangers of retaliation, even among allied nations?

Mr. Nott: As I understand it, Labour Members are advancing the argument that we should identify core industries and impose controls to protect them. The single greatest core industry in this country is food, but I understand that the Labour Party and the TUC want a completely open market there. Apart from anything else, the proposed policy is not consistent.
With regard to synthetic fibres, we have throughout said that we believe in the open trading system. However, where there is a sudden surge of imports which come within article 19 of the GATT we are prepared to act, which is what we did for two textile products.

Mr. Robert Sheldon: Is the Secretary of State aware that a most effective way of limiting manufactured imports is to have a realistic exchange rate so that the price is increased and not reduced, as appears to be the Government's policy? Is the right hon. Gentleman further aware that the main argument that the Government use for not intervening in the exchange rate market is that it would affect monetary aggregates? Will he accept that a high price is being paid by British industry to maintain our monetary position?

Mr. Nott: The hon. Member for Tottenham (Mr. Atkinson) wishes to plan world trade and the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) wishes to plan international exchange rates. In my view, there is no way in which the Government, at present, could successfully hold down the price of sterling, which I understand is what the right hon. Gentleman is suggesting, for anything more than a short time. Such a policy would be utterly self-defeating.

Mr. Beaumont-Dark: Is my right hon. Friend aware that most business men would agree that putting a great barrier around this country would in no way make industry more efficient? However, will my right hon. Friend make certain that imports are not dumped? Will he look into the question of black and white television sets from Thailand, which are virtually being dumped?

Mr. Nott: I entirely agree that we we must act vigorously through the EEC Commission wherever dumping arises. This is now under the direct authority of the Community, but we must give every assistance that we can to as speedy action as possible under the regulations set out in the GATT.
I followed my hon. Friend's question about monochrome sets from Thailand. I am aware of the suggestion that about 200,000 such sets are about to arrive. However, this is a prediction of what one firm in Thailand might do, and so far it has not done so. The sets have not appeared yet, but we shall investigate the danger of their coming here.

Mr. John Smith: Is the Secretary of State aware that he spent months attempting to get a Community solution to the problem of unfair trading in textiles by the United States and ended up by getting pathetic quotas? For example, for nylon carpet yarn the quotas were 30 per cent. higher in 1980 than the total imports of 1979 which he considered disruptive. Is that the way to protect British trading interests?

Mr. Nott: In my view, the quota for nylon carpet yarn was appropriate to the circumstances. In settling the quota I was particularly concerned not to damage the downstream carpet industry. Had we set those quotas too low it might have helped those who were producing nylon yarn, but it would have damaged an even greater number of firms which were producing the downstream products—the carpets themselves. Therefore, in employment terms there was an argument for a relatively high, rather than a very low quota.

Price Commission

Mr. Canavan: asked the Secretary of State for Trade when he expects next to meet the chairman of the Price Commission.

Mr. Nott: I have no plans to meet the chairman at present.

Mr. Canavan: In view of the various economic reports published today predicting further increases in the rate of inflation to well over 20 per cent., and in view of the growing number of people within the Tory Party itself, and even


within the Cabinet who are beginning to realise that extreme doctrinaire monetarism is not the cure for inflation, will the Government, even at this late date, abandon their plans to abolish the Price Commission, because people are calling for more price control, not less?

Mr. Nott: The hon. Member is obsessed with the Price Commission, which has only a few weeks of life left. I would gladly make him the chairman of the Price Commission if it were in my power to do so.
On the serious point, I am not sure what some of the forecasters are proposing. I read today that some were recommending measured reflation. I am not sure what that means in present circumstances. There are only two questions to be asked at present: first, can we finance the deficit without intolerably high interest rates; secondly, is private sector credit growing too fast in relation to output? Those are simple questions, and the answers to both will be given by the Chancellor of the Exchequer in his Budget Statement.

Mr. Maclennan: Does the Secretary of State consider that Government changes in competition policy have had or will have an effect on the level of prices?

Mr. Nott: I hope that the Competition Bill will have some marginal influence on prices, but I have never made any claim that it will transform our economic environment, unlike Labour Members, who claimed that the Price Commission would substantially change the course of inflation. The hon. Member is confusing the symptoms of inflation with its causes.

Mr. Rippon: My right hon. Friend has posed two questions, may I put a third? How does he think that a 17 per cent. minimum lending rate has helped to contain inflation?

Mr. Nott: My right hon. and learned Friend must understand that when the Government inherited a prospective borrowing requirement of £11·5 billion—which we succeeded in bringing down to a prospective requirement of £8·5 billion—we inherited a substantial deficit which we had to finance in a non-inflationary way. Interest rates will have to be at whatever level is necessary to finance that deficit.

Mr. John Smith: Will the Secretary of State answer a fourth question, and tell us what very high rates of VAT do to inflation?

Mr. Nott: High rates of VAT have nothing whatever to do with inflation. The rate of VAT, which was increased by the Chancellor in his first Budget, was offset by an equal reduction in income tax. Therefore, the rate of VAT has nothing whatever to do with inflation.

Companies (Winding-up Procedure)

Mr. John Townend: asked the Secretary of State for Trade whether he will investigate means of simplifying the winding-up procedure and the conversion of companies into unincorporated bodies in order to assist smaller companies.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): The Insolvency Review Committee has been asked to consider possible less formal procedures as alternatives to company winding-up proceedings in appropriate circumstances. I await its report with interest.

Mr. Townend: Will my hon. Friend consult the Chancellor to see whether there is a means of reducing the tax disadvantages of taking such action?

Mr. Eyre: Yes, of course. Consultations of that kind go on constantly. I note that my hon. Friend is concerned about the position of small businesses, and in that connection I draw his attention to the Green Paper on company accounting and disclosures, published last year. There are a number of helpful proposals in that, and we are now studying the comments on those proposals with the aim of preparing legislation for next Session.

Mr. Clinton Davis: As the Minister has said previously that he hopes to receive the Cork report by the end of this year, can he predict when he hopes to introduce legislation to reform the insolvency law? Is it likely to be in this Parliament?

Mr. Eyre: Our intention is that it will be within the lifetime of this Parliament. The hon. Member is right in saying that the Cork report is expected towards the end of this year, and we are anxious to bring forward legislation as soon as possible thereafter.

Mr. Fletcher-Cooke: Is my hon. Friend aware that the winding-up procedure of companies and bankruptcy petitions are multiplied these days because of the failure of the normal debt-collecting process? Will he take that into account in any consideration to reform winding-up and bankruptcy proceedings?

Mr. Eyre: Certainly I shall take account of the points that my hon. and learned Friend makes. I know that he is aware that responsibility for the debt-collecting procedures which are followed through the courts is that of the Lord Chancellor.

Metrication

Mr. Dubs: asked the Secretary of State for Trade if he is satisfied with the progress currently being made towards metrication.

Mr. Eyre: Yes. The voluntary approach will enable industries to complete the change to metric working as and when it is most appropriate for them to do so.

Mr. Dubs: Does the Minister agree that the lack of decisiveness on the part of the Government means that we are having the worst of both worlds? Does he not realise that we shall be half metric and half non-metric for years to come, and that, except for the schools that have changed to metric working, we shall have a mixed system? Do the Government really want to go down in history as the first Government who tried to work out how many centimetres there were in a rod, pole or perch?

Mr. Eyre: The Government's policy is clear. There is no impediment to any firm changing to metric working when it chooses. That decision is a matter for its commercial judgment, taking estimated costs and benefits into account. Costs are often critically dependent on the timetable adopted, because machines, equipment and working practices have to be altered or scrapped.

Mr. Jessel: Will my hon. Friend give an assurance that we shall keep the pint, the yard and the mile?

Mr. Eyre: My hon. Friend will be pleased to hear that Parliament need not make further decisions on these important matters until 1989.

Mr. John Fraser: Does not industry take the view that a voluntary change to metrication is best accompanied by an order made by the Government, with the agreement of industry and consumers setting a date so that the whole of trade or industry can work together towards an orderly and planned change?

Mr. Eyre: The hon. Gentleman will appreciate that it is necessary for industry itself to agree that date. As I understand it, there is no legal impediment to prevent industry from coming forward with voluntary proposals, choosing whatever date it wishes to adopt.

Mr. John Fraser: Does that mean that if industry agrees a date the Government will make the appropriate order?

Mr. Eyre: If there is agreement, and if industry works within that agreement, that will solve the problem.

Steel Imports

Mr. Flannery: asked the Secretary of State for Trade what tonnage of (a) bulk steel and (b) special steel was imported in the first six weeks of this year; and from which countries.

Mr. Nott: Statistics of overseas trade are compiled on a monthly basis. In January 24,000 tonnes of alloy steel and 233,000 tonnes of other steel were imported. Details by country are not yet available.

Mr. Flannery: Does not the Minister realise that the importation of these steels at a time when massive closures in the steel industry are under way—53,000 men are to lose their jobs—is causing an attitude of embittered determination by the steelworkers to continue with the strike? Will he, together with his right hon. Friend the Prime Minister, intervene and put more money on the table? If he had seen the massive demonstrations in Rotherham and Sheffield yesterday he would realise how intense is the strike and the determination of the steelworkers to achieve 20 per cent., with no strings attached.

Mr. Beaumont-Dark: That is rubbish, silly fool.

Mr. Nott: The United Kingdom is, traditionally, a net exporter of steel. In 1979 the export of surplus steel amounted


to 637,000 tonnes. The result of the present dispute, which I deplore as much as the hon. Gentleman does, is that imports are now bound to increase, and exports will suffer. The dispute has done no good for anybody working in the industry.

Mr. Kenneth Lewis: Will my right hon. Friend make it clear to the leaders of the unions in the steel industry that there is enough money on the table to justify a settlement of the strike? Will he make it clear also that if they do not settle the strike imports will increase and those selling the imports to Britain will achieve a firm market here, which will have disastrous consequences for the industry and the workers?

Mr. Nott: I am tempted to be drawn into a debate on the matter, but there are enough people trying to solve the steel dispute without my intervening in the responsibilities of the BSC and the unions involved. Much as I should like to debate the matter with my hon. Friend, it would not help the present position if I were to do so.

Mr. Campbell-Savours: Is the Minister aware that many steel stockholders, especially importing stockholders, are demanding particularly aggressive terms from buying manufacturing industry? Is he aware that in some cases they are demanding a price which has risen by as much as 20 per cent. to 25 per cent., and are demanding also that contracts are signed for a year's supply? Does the right hon. Gentleman understand that the result will be heavy imports? Does he not feel that he should intervene and ask those stockholders to operate in the national interest, as everyone else is trying to do?

Mr. Nott: I am afraid that the shortage of supply of a product normally tends to raise its price. That is not an unusual thing to happen. There is no evidence that there has been, to use the hon. Gentleman's expression, any profiteering by the steel stockholders at the present time. If there is a shortage of a product, one would naturally expect its price to rise.

Mr. Adley: Leaving aside the industrial relations aspects, will not the only economic result of a continuance of the strike be to make British industry less competitive

increase imports, and decrease the numbers working in the industry?

Mr. Nott: I fear that the result of the dispute will lead to lower exports in the immediate future, which will inevitably lead to higher imports. That cannot be avoided.

Merger Policy

Mr. Neubert: asked the Secretary of State for Trade when he expects to publish his new proposals on merger policy.

Mr. Nott: The Government are committed to a strong and effective competition policy. It is too soon to say whether this requires any changes in the legislation on mergers.

Mr. Neubert: May we take it that the referral of Blue Circle's bid for Armitage Shanks to the Monopolies and Mergers Commission is a signal from my right hon. Friend that he recognises that the British economy tends to be over-concentrated, that the urge to merge in recent years has not always shown unquestionable benefits, and that the policy which tended to encourage small but more competitive companies might, in many cases, be preferable?

Mr. Nott: Some of those features may have led to the recommendation to me by the Director General of Fair Trading for a reference to the Monopolies Commission. I must make it clear that my powers enable me to overturn a recommendation by the Director General, but I seek not to do that unless there are overriding political reasons for so doing. In this case the Director General recommended that the case should be referred to the Monopolies Commission, and I saw no overriding political reason why I should interfere with that recommendation.

Mr. Maclennan: In view of the Secretary of State's earlier admission that the Government's policy on competition will have only a marginal effect on the level of prices, will he stop indicating to the British people that competition is an effective means of holding down prices? Will he seek to strengthen competition policy from the steps that he has announced already, to make it more effective?

Mr. Nott: The principal new element in the Competition Bill, a firmer policy on anti-competitive practices, is one which, interestingly enough, stems from the now Opposition's Green Paper, which no doubt the hon. Gentleman helped to draft. I expect him to welcome the new Bill. I am making no brave prophecies for the Bill. We wish to build up and strengthen competition policy. We shall proceed step by step. I shall not make any brave, great prophecies for it. I believe that the measures contained in the Bill will prove helpful.

Dyestuffs (Imports)

Mr. Sheerman: asked the Secretary of State for Trade if he will make a statement on the European Community agreement with the Republic of China, which will allow dyestuffs to be imported without duty.

Mr. Parkinson: China was admitted to the European Communities generalised scheme of preferences on 1 January this year. The duty-free treatment which as a result is enjoyed by industrial goods imported from China is subject in the case of some products to limitations. United Kingdom industry was consulted when these limitations were under discussion, but dyestuffs were not then mentioned as a sensitive area. It would be open to us to seek to have a ceiling applied to duty-free imports of the dyestuffs concerned, and we are in touch with the United Kingdom industry to see whether there is a case for action.

Mr. Sheerman: Is the Minister aware that that statement will be welcomed if it is an earnest of good intention? Is he aware also that many manufacturers in my constituency wish me to ask him to ensure that early action is taken to prevent yet another sector of the textile industry from being hit? Many people in West Yorkshire believe that the Department of Trade is helping the problem not one whit in any areas of the textile industry.

Mr. Parkinson: The hon. Gentleman's rather general assertion is not borne out by my experience when I vistited Yorkshire a week ago and spoke to those in the industry. However, there is a possibility of action now that the problem has been brought to our attention. When

the chemical industry was consulted before the agreement was reached, no mention was made of dyestuffs.

USSR

Mr. Chapman: asked the Secretary of State for Trade what recent representations he has received about trade with the Union of Soviet Socialist Republics.

Mr. Parkinson: I have received representations both supporting and opposing the development of trade with the Soviet Union. The Government will continue to encourage mutually beneficial trade between our two countries.

Mr. Chapman: Will my hon. Friend confirm that the imbalance of trade between our two countries is running at a proportion of 2:1, with a deficit for us of £400 million annually? Does he not think that the Government ought to promote more energetic policies to balance our trade and that the matter assumes a political significance if we are ever to make an effective response to the Russian invasion of Afghanistan?

Mr. Parkinson: We should like to see the imbalance in our trade reduced, and we are taking steps to encourage our exporters to seek mutually beneficial commercial opportunities for themselves. However, many of the things that we buy from Russia, such as diamonds, are subsequently resold and exported, and therefore the bare figures are slightly misleading.

Mr. Dalyell: If it is the Government's policy to encourage exports to the Soviet Union, what is the logic of saying to our athletes "But you cannot go"?

Mr. Parkinson: I am sure that the hon. Gentleman has listened carefully to the arguments. We believe that the Olympic Games are a gigantic political publicity act, and we do not believe that British athletes should take part in propagating the few attractive features of a country which invades others without cause.

Mr. David Atkinson: Is my hon. Friend aware of the considerable tonnage of chromium and chromium oxide that we import from the Soviet Union and of the considerable reserves of that mineral in Zimbabwe-Rhodesia? Will he assure us that he will encourage trade in that


mineral with Zimbabwe-Rhodesia rather than with the Soviet Union?

Mr. Parkinson: I assure my hon. Friend that we shall seek to promote trade with Zimbabwe-Rhodesia in every way open to us.

Mr. Cryer: Is it not sheer hypocrisy for the Government to talk about encouraging trade with the Soviet Union and, at the same time, to try to discourage athletes from going to Moscow? Would it not be better for the Government to abandon the pressure which they are bringing to bear on athletes and, if we are to encourage trade at the same time, to say that they ought to go? If the Minister's argument is that we should not go to the Moscow Olympics because Russia has invaded Afganistan, will he confirm that most countries which go to the Olympics have supported invasions of one sort or another?

Mr. Parkinson: I hope that the hon. Gentleman listened to my reply about mutually beneficial trade. Perhaps he will be able to tell me later what is mutually beneficial about going to the Olympic Games and taking part in a gigantic propaganda exercise.

Mr. Russell Kerr: A Little Englander.

Mr. Clinton Davis: Will the Minister recall how he and his colleagues pontificated, when in opposition, about the disgraceful share of bilateral trade carried in British ships between the Soviet Union and this country? What have his Government done about that? Perhaps he would like to take instructions.

Mr. Parkinson: As the hon. Gentleman knows, any action on that front would have to be EEC-wide in order to be effective, and we are pressing for such EEC action.

Mr. Robert Atkins: Will my hon. Friend reconsider the situation regarding imports and exports between this country and the Soviet Union? Bearing in mind that what I have said before about Russian Christmas cards applies now to the greetings card industry as a whole, is my hon. Friend aware that hon. Members on both sides recognise the difficulties posed by the continual dumping of Russian greetings cards throughout the year?

Mr. Parkinson: I only hope that my hon. Friend received at Christmas the number of greetings cards to which his efforts on behalf of the industry would entitle him. He has brought a problem to our attention, and he knows that we are looking into the possibility of anti-dumping action.

European Economic Community

Mr. Deakins: asked the Secretary of State for Trade if he is satisfied with the present balance of trade between the United Kingdom and the European Economic Community.

Mr. Dykes: asked the Secretary of State for Trade if he is satisfied with the development of United Kingdom manufactured exports to the other European Economic Community countries in the last six months.

Mr. Parkinson: No, Sir. I look for improvement in our trade performance with the European Community in both manufactured goods and overall.

Mr. Deakins: Since the balance of our trade with the EEC can hardly be called "mutually beneficial"—to use the Minister's own words—because it is overwhelmingly in favour of the EEC, will he undertake to draw the attention of his right hon. Friends in the Treasury, the Foreign Office and the Ministry of Agriculture, Fisheries and Food who are engaged in negotiations with the EEC to this important bargaining counter for use by us in those negotiations?

Mr. Parkinson: From time to time the hon. Gentleman should put aside his anti-EEC prejudices and look at the facts. Our exports to the EEC last year amounted to £18,000 million. Our exports of manufactures grew by 21 per cent. last year—far faster with the EEC than with any other part of the world. Is the hon. Gentleman suggesting that we would help ourselves by cutting ourselves off from those markets?

Mr. Marlow: Would my hon. Friend think it prudent to ask his officials to start a formal investigation into trading alternatives to the EEC for the United Kingdom, because if the rest of the countries prove to be as intransigent as the French are at present, we may need those alternatives?

Mr. Parkinson: That would be a fairly fruitless exercise. We do 42 per cent. of all our trade with the EEC, and searching around for trading partners to replace that 42 per cent. would seem to me to be a waste of time. We should concentrate on improving our own performance.

Mr. Hooley: Does not the Minister recognise that while this massive imbalance in the import and export of manufactured goods between this country and the EEC continues we are, in effect, financing the modernisation of French German and Italian industries from North Sea oil?

Mr. Parkinson: The hon. Gentleman's thought processes always intrigue me, and his assertion is a particularly interesting production of those unusual thought processes.

Holiday Caravan Industry

Mr. Lee: asked the Secretary of State for Trade if he will make a statement about the code of practice being negotiated with the holiday caravan industry.

Mr. Tebbit: My right hon. Friend is awaiting the reactions of the site operators to the changes which she has suggested to the draft code of practice. Meanwhile, as my hon. Friend may be aware, Government amendments to the Competition Bill which have been accepted in the other place will extend the provisions of the Competition Bill and of the Fair Trading Act to holiday caravan sites.

Mr. Lee: What steps does my hon. Friend propose to take about some of the malpractices on caravan sites and similar places of which the general public complain?

Mr. Tebbit: As I explained, a draft code of practice has been put by the trade to my right hon. Friend the Minister for Consumer Affairs. She, in turn, has suggested changes that might be made to deal with the complaints. The ball is in the court of the trade, and I hope that we shall shortly receive its proposals. In the meantime, the Competition Bill will extend the rights of customers on caravan sites.

Mr. John Fraser: Will the hon. Gentleman ask the Director General of Fair Trading to investigate some of the worst

practices when the Competition Bill becomes law?

Mr. Tebbit: We have not yet arrived at that point, but certainly my right hon. Friend will bear in mind the hon. Gentleman's suggestion. However, I think that it would be best to wait until the Bill becomes law.

Exports and Imports

Mr. Knox: asked the Secretary of State for Trade what was the value of exports from and imports into the United Kingdom in the most recent month for which figures are available.

Mr. Parkinson: In January 1980 exports from the United Kingdom were valued at £3,879 million and imports into the United Kingdom at £4,225 million.

Mr. Knox: Does my hon. Friend agree that exports would have been much higher and imports much lower if the exchange rate of sterling had been more realistic? Has he drawn the attention of the Chancellor of the Exchequer to the damage that is being done to British trade by the current high level of the exchange rate?

Mr. Parkinson: My right hon. Friend the Secretary of State dealt with that point earlier when he pointed out that one must get out of the habit of thinking that the Government can fine-tune exchange rates. The rate of exchange, and the level at which it stands, is not within the gift of the Government.

Mr. Straw: Is the hon. Gentleman aware that in the past week 630 workers in North-East Lancashire have lost their jobs because of the crazy exchange rate policies being pursued by the Government and their abject failure to impose proper protection against low-cost imports and imports from the United States against our textile industry? Is the Secretary of State willing to take further action to give proper protection to our vital industry?

Mr. Parkinson: The textile industry receives far more protection than any other. A total of 95 per cent. of all imports from low-cost countries arrive under quota and are closely controlled. On the exchange rate, I think that the hon. Gentleman is grossly oversimplifying, as he usually does, the causes


of the decline of the business to which he refers.

Mr. Rippon: Will my hon. Friend indicate to the House what effect he thinks a 17 per cent. minimum lending rate has on the exchange rate?

Mr. Parkinson: Very little, indeed. What the 17 per cent. interest rate reflects is the fact that we have a high inflation rate and that if money is not to be lent by depositors to banks at an unfair rate of return and borrowed at a low rate of interest which does not reflect its real value, changing that circumstance would not help at all.

Mr. John Smith: This is a very revealing day for Ministers in the Department of Trade to display their ignorance about the economic consequences of their policies. Will the Minister explain how British exports can possibly succeed when the exchange rate is so high, buoyed up by North Sea oil and not by underlying productivity? Is it not open to the Government to influence exchange rate policy so that our exporters get a reasonable chance in world markets?

Mr. Parkinson: The right hon. Gentleman learnt little during his time at the Department. He obviously never studied the performance of Switzerland, Germany and Japan, which, against a background of a firm, high exchange rate, contrived to improve their productivity their competitiveness and their industrial performance.

Mr. Campbell-Savours: On a point of order, Mr. Speaker. I wish to raise a point of order relating to trade questions.

Mr. Speaker: If the hon. Gentleman's point of order relates to his question being transferred, will he wait until the end of Question Time? I shall allow one minute extra for questions to the Lord Privy Seal.

Oral Answers to Questions — OVERSEAS DEVELOPMENT

Overseas Aid Policy

Mr. Jessel: asked the Lord Privy Seal what action he is taking to ensure that aid provided by the United Kingdom is used efficiently to raise living standards of poor people whilst promoting trade and employment in the United Kingdom.

The Minister for Overseas Development (Mr. Neil Marten): Within our overall programme, which will reflect increased commercial and industrial emphasis, the developmental value of specific projects will be fully appraised.

Mr. Jessel: Will my hon. Friend ensure that British aid is not used for uneconomic prestige projects which do comparatively little to raise living standards? Will he say what he is doing for the poorer countries of the Commonwealth?

Mr. Marten: On the second part of the Question, we shall, in the allocation of our bilateral aid, continue to attach great importance to the Commonwealth, which currently receives 70 per cent. of the bilateral share of the aid programme. On the first part of the question, all projects proposed for aid finance are fully appraised. In recent years the average rate of return on United Kingdom capital aided projects is calculated to be over 15 per cent.

Mr. Deakins: Will the hon. Gentleman try to determine, when assessing aid projects for appraisal, whether the benefits are likely to go to a small minority in the country concerned or to benefit the mass of the people?

Mr. Marten: We shall always try to benefit the poorest sections in our projects, which are designed for that purpose.

Mr. Bowen Wells: Does my hon. Friend agree that one of the most effective ways of aiding poorer countries is through the Commonwealth Development Corporation? Will he confirm that he will make no reduction in its long-term investment programme in the review that he is undertaking?

Mr. Marten: Yes. I confirm that the aid passed through the Commonwealth Development Corporation is nearly always extremely effective. On the second part of the question, my hon. Friend must await the publication of the White Paper on expenditure.

Mr. McNamara: Will the hon. Gentleman give an undertaking that no money from the aid programme will be spent on defence projects, such as the £50 million that went to Turkey, and that such money should come from the Contingency Fund


or the defence fund, and not from the overseas aid development fund?

Mr. Marten: Overseas aid money is not used for defence purposes.

Aid Programme (Return on Disbursements)

Mr. Brocklebank-Fowler: asked the Lord Privy Seal what is his latest estimate of the total value of orders to British business financed out of the British aid programme in the 12 months to the latest convenient date.

Mr. Neil Marten: My best estimate is that in 1978, the latest year for which figures are available, the total value of orders to British business arising from the aid programme was in the region of £415 million out of a total gross expenditure of official development assistance of £685 million. This figure combines estimates of the procurement return from both bilateral and multilateral aid.

Mr. Brocklebank-Fowler: I am grateful to my hon. Friend for that reply. In the light of his announcement last week that the higher proportion of the aid budget is to be made available for supporting trade overseas in the future, will he say what amount he is setting aside to support trade next year? Will he discuss with his right hon. Friend the Secretary of State for Trade the possibility of seeking a better return from those disbursements that are made through the European development fund?

Mr. Marten: On the second part, most certainly. I said that when answering questions on the aid statement. On the first part of the question, in accordance with our review of aid policies we shall seek to increase British procurement from multilateral aid institutions. In respect of bilateral aid, we shall have regard to whether projects relate to the needs of British industry and to opportunities for subsequent exports.

Mr. J. Enoch Powell: What is the point of paying ourselves for our own exports?

Mr. Marten: Because, in the world today, there is need to help developing countries.

Dame Judith Hart: Is the Minister aware that he has said very little that is

new? In the light of the Brandt Commission report and all that is known about the relationship between aid and the benefit of trade to British industry, can the hon. Gentleman produce figures that will indicate the effect of the present recession in world trade on our orders? The World Bank estimated a 4 per cent. reduction over the last few years, but that figure is a little out of date. Will the hon. Gentleman promise to tell the House what the reduction actually is? This is the key relationship between the development aid programme and trading benefit to British companies.

Mr. Marten: I shall try to give that information, but not now. I shall write to the right hon. Lady. I am sorry that there is nothing new. That is because questions have not been put down which would reveal anything new.

Aid Programme (Aims and Objectives)

Mr. Deakins: asked the Lord Privy Seal what steps the Overseas Development Administration takes to publicise the aims and objectives of the United Kingdom aid programme.

Mr. Neil Marten: There is a conventional but modest programme of press activities, publications, and external engagements. These supplement anouncements made to this House.

Mr. Deakins: Is it not essential for the support of the programme to have informed and concerned public opinion? Is the Minister satisfied that the present small amount being spent for this purpose will be sufficient in the long run?

Mr. Marten: Yes, I think that it is. The question to which I was directing my answer was connected with the publication by the Ministry of Overseas Development. As for the general educational programme, I think that a lot can be done voluntarily. It always has been. Voluntary organisations, including, if they wish, Members of Parliament, teachers and churches, could step this up. It does not always need Government money to get a message across.

Mr. Costain: Does not publicity of this type tend to impress other overseas countries, so that they also contribute?

Mr. Marten: Other countries must draw their own conclusions from what publicity we provide.

Mr. Christopher Price: When the hon. Gentleman publicises his aid policy, will he explain how his policy on overseas students' fees is connected with the general principles of aid policy which he announced recently? Is he aware that if this policy continues many poor students who would, in the past, have come to Britain will end up receiving their higher education in Moscow and behind the Iron Curtain?

Mr. Marten: The answer to that question should come from my right hon. and learned Friend the Secretary of State for Education. I am, nevetheless, looking into this question myself.

Mr. Bowen Wells: Does my hon. Friend agree that publicity should be directed to British companies, which are now free from exchange control and able to invest overseas? If his Department and those companies combined their activities, this would help overseas development more than any other measure.

Mr. Marten: Yes. The publicity to which we have been referring goes to business and industry, and the British Overseas Trade Board is also taking a particular interest on behalf of British industry.

Mr. McElhone: Will the Minister accept that one of the best ways of publicising his aid programme would be fully to restore the development education programme started by the last Government, which would have amounted to £3 million this year? Will he also accept that, just as his Government destroyed the Price Commission to conceal price increases, so he has almost destroyed the development education programme to conceal restrictions on the aid programme?

Mr. Marten: The hon. Gentleman has drawn the wrong conclusion from that. The rundown in Government-financed development education was because we could not afford to spend £3 million on educating ourselves on development when greater needs were to be found in the developing countries.

Mr. Kenneth Lewis: Is my hon. Friend aware that the only way to expand aid

to the underdeveloped countries, which is necessary, is not for one country to do it alone but for urgent action on the Brandt report, so that there is an international effort?

Mr. Marten: There is a later question on the Order Paper about the Brandt report. There may be something in what my hon. Friend says, but the Government are looking into this carefully, and there is to be a debate in another place next week on this subject.

Mr. Spriggs: Is the Minister aware that the best publicity that this country can gain for its aid programme is the service which British Rail Engineering Ltd. has provided in various underdeveloped countries where British aid has been directed, in providing not only a network of railways, but other necessary basic engineering services? The Government should be commended for the service which they have provided for the poorer people of the world.

Mr. Marten: I agree that where the railwaymen have been abroad they have done good work of great benefit to the developing countries.

Dame Judith Hart: Is the hon. Gentleman aware that his sudden announcement that the other place is to debate the Brandt report next week is a shade disturbing? He will be aware that there are 130 signatures on one motion and others on another calling for a debate on the report in this House. He told us last week, I think, that it was far too early for him to have reached conclusions on the report. Can he tell us that a debate in another place—which I agree may be admirable and may provide useful guidance for him—will in no way preclude a debate in this House?

Mr. Marten: Although that must be a question for the Leader of the House, I do not think that it would preclude a debate in this House. I am sure that my right hon. Friend has taken note of what the right hon. Lady has said. The Government will answer that debate in the other place, and one will get a preview of their views there. One factor that we must bear in mind in considering a proper debate on the report in this House is that the report must be available to hon. Members before we debate it.

Dame Judith Hart: On a point of order, Mr. Speaker. How can the Government give a view on the Brandt report when it has not been published and when it is agreed that the Minister has to consider it before he can answer a question in this House?

Mr. Marten: The Government have received a copy and I have bought a copy in the shops. Unfortunately, the shops have now run out of stocks.

QUESTIONS TO MINISTERS

Mr. Campbell-Savours: On a point of order, Mr. Speaker. In January of this year. I put down to the Secretary of State for Trade question No. 55, to ask
the Secretary of State for Trade what negotiations are taking place between his Department and the Law Society on the introduction of changes in the Solicitors' Practice Rules in line with the recommendation of the 1976 Monopolies and Mergers Commission report.
The right hon. Lady the Minister for Consumer Affairs, who is unfortunately unable to attend the House today, replied:
None at present."—[Official Report 4 February 1980; Vol. 978, c. 51.]
I could not understand that answer, in the light of the right hon. Lady's statement at the seventh sitting of the Standing Committee on the Competition Bill, when, following a long statement that I made on the need for action on the basis of that MMC report, she said:
my Department is currently negotiating with the professions concerned."—[Official Report, Standing Committee B; 20 November 1979, c. 339.]
I replied by tabling a further question to ask the Secretary of State
if, following the reply of the Minister of State for Trade to the hon. Member for Workington",

in the light of this question, he could let me know when we could expect a statement following the consultations which are taking place. On 26 February, that question was transferred to the Attorney-General, without my being informed.
I raise this matter as a point of order, first because I believe that I should have been informed. I do not see why, because a question is embarrassing to a particular Minister, he or she should transfer it—or instruct the Department to ask the Table Office to transfer it—to another Minister, thereby denying me the chance to put that question on the Floor of the House, when it deals with a matter of substantial public concern—the charges of solicitors and the fact that there is no effective advertising among solicitors. I should be grateful if you could tell me what the position is, Mr. Speaker.

Mr. Speaker: The House will have listened with concern to the hon. Member. Every hon. Member is entitled to be informed if his question is being transferred to another Minister: otherwise there is no protection of our Order Paper and no protection for Back Benchers. I can say little more than that to the hon. Member. I think that he was right to air his grievance.

Mr. Stokes: On a point of order, Mr. Speaker. Is it not deplorable that so many hon. Members should put down questions yet not be here when they are called, as happened today?

Mr. Speaker: It is true that when I called the first half a dozen questions today, the hon. Members concerned were not here. As a rule, if an hon. Member is not in his place when his question is called, I get a personal explanation from him by way of correspondence. I am not asking for that for today; I am just saying that that is one of the courtesies which hon. Members normally follow.

LAMBETH, SOUTHWARK AND LEWISHAM AREA HEALTH AUTHORITY

The Secretary of State for Social Services (Mr. Patrick Jenkin): With permission, Mr. Speaker, I wish to make a further statement about the future of the Lambeth, Southwark and Lewisham area health authority (teaching).
I reported to the House last Tuesday. On Wednesday I had a meeting with Mr. Stanley Hardy, chairman of the AHA(T), who told me that the soundings he had taken among members of the authority led him to believe that the authority would in future accept its responsibility to comply with cash limits. On Thursday I received a letter from the solicitor for the London borough of Lewisham, writing on behalf of the three London boroughs which were the applicants in the case before the court informing me that his clients would not object to the commissioners remaining in a purely caretaking role until 31 March 1980. He envisaged that the authority, on resuming control from 1 April, would have freedom of action to review decisions taken by the commissioners, but accepted that the authority's expenditure should stay within cash limits. As the House knows, there is a clause in the Health Services Bill now in Committee which, if approved by Parliament, will impose a statutory duty on all health authorities to comply with the Government's requirements on cash limits.
The House will, I know, recognise the importance of these expressions of intent and the recognition they imply of the position which it was always my intention to sustain. In these circumstances, I thought it right to invite members of the AHA(T) to meet me last Friday to review the position, and I am grateful to the many members who at such short notice attended the meeting. The discussion took place in a helpful and constructive atmosphere. For their part, the members present, nearly two-thirds of the total membership, unanimously assured me that they will be prepared to accept an obligation to keep the authority's expenditure within cash limits. For my part, I assured the members that on that basis they would be free to review any of the decisions taken by the commissioners, and, moreover, that during the short care-taker

period up to 31 March the commissioners would not initiate any changes of major significance. I saw the commissioners' task as preparing for an orderly handover to the members of the authority, taking only such routine decisions as were essential to maintain services in the meantime.
It seems to me that this would be a not unsatisfactory outcome and I have accordingly decided not to appeal against the judgment of Mr. Justice Wolff but instead to arrange for the members of the authority to resume their functions from 1 April next.
The solicitors for the three councils may seek a formal order from the court within the next day or so. Since the judgment effectively declares invalid the directions that I gave last August, legislation will be necessary to regularise the position over the past seven months and to give immediate backing to the status of the commissioners up to the end of this month. The Government are therefore laying a Bill before the House to give legal effect to the decisions and actions taken under the directions from 1 August 1979 up to and including 31 March 1980. Copies of the draft Bill are available in the Vote Office.
My right hon. Friend the Leader of the House will make a statement about the arrangements for the Bill in due course, following discussions through the usual channels. I offer my full and unqualified apology to the House in this matter and in particular for the trouble and inconvenience which the Bill will cause to right hon. and hon. Members.

Mr. Orme: The Secretary of State's statement reflects the serious misjudgment that he made as Secretary of State. He cannot hide from that. He has come to the House today with a full apology but it might have been better if he had made a full apology last Tuesday. His statement shows that his advice and his Department's advice was radically wrong. I am sure that the House will take note of that.
I give credit to my hon. Friend the Member for Nottingham, West (Mr. English) for raising the matter last week He put his finger on the central point. The Government must now introduce a retrospective Bill. My hon. Friend


deserves credit for his parliamentary astuteness.
The Secretary of State referred to cash limits and the undertaking which he says he has received from the area health authority. What steps did he take last July to ascertain from the AHA whether it was prepared to live within the cash limits? Does he agree that he acted in a rather peremptory manner in dismissing that authority without consultation? We shall require to discuss several issues when we have sight of the Bill. My hon. Friends and I have not yet been able to obtain a copy of the Bill which contains retrospective elements which we shall want to examine.
What is the position of the two hospitals which have been closed by the commissioners? Will the AHA be able to reopen them? Is the Secretary of State talking about retrospective cash limits or those which affect the next financial year? What about the patients who have been removed from those hospitals? Have any patients suffered because of the commissioners' action? What about the staff who have lost their jobs or who have been promoted? Will salaries be reduced and will those who have lost their jobs get them back?
The Secretary of State spoke about taking action to protect the commissioners. I hope that he will allow employees and patients who have cause to take action to take that action. The proposed Bill is a constitutional measure which should be taken on the Floor of the House. There must be adequate time to deal with it.

Mr. Jenkin: The right hon. Member for Salford, West (Mr. Orme) has asked me many questions. He said that it was inappropriate that I did not offer the House an apology last Tuesday. On that day only 24 hours had elapsed since the court's decision and I had not seen a transcript of the judgment. I had not decided whether I should appeal. I am sure that the right hon. Gentleman will recognise that had I appealed successfully there would be nothing for which to apologise. I decided not to appeal but to take the necessary action to give effect to the judgment of the court. It is right that I should offer my full apologies to the House, which I now repeat.
The right hon. Gentleman asked whether the cash limits referred to the past or the future. The members of the area health authority have recognised that it is sensible for the commissioners to remain in power until the turn of the next financial year. Therefore, the undertakings refer to the cash limits for the next financial year. The right hon. Gentleman also asked whether I had acted in a peremptory manner in purporting to make a direction. Such a charge is valid only without reference to the long period which preceded the decision on 1 August during which the authority consistently overspent its limits.
The right hon. Gentleman said that the Bill would be retrospective. He asked whether it would be possible for the area health authority to reopen the two hospitals. In order to regularise the position for the past, the Bill must have retrospective effect. That point was made by the hon. Member for Nottingham, West (Mr. English) in his Standing Order No. 9 application last week. The future of the two hospitals is for the new authority to decide. It is free to change decisions reached by the commissioners but it must do that within the context of the cash limits which we have laid down.
The right hon. Gentleman asked about patients and staff. Precisely to avoid the legal doubts and wrangles that could arise without a Bill, I ask the House to approve the Bill. I understand that if the applicants go to court and obtain an order for a prerogative writ giving effect to the judgment of Mr. Justice Wolff everything that has taken place since I made the directive last August will be held to be invalid. Since that could give rise to considerable personal and corporate difficulties it is sensible for the House to pass the Bill. We shall discuss such matters when we debate the Bill.

Mrs. Fenner: I regret that my right hon. Friend was so badly advised legally. Is he now totally satisfied that the cash limits to which the Lambeth, Southwark and Lewisham area health authority has agreed will mean that the Medway health district will not be as deprived as it has been in the last several years, by up to £3 million, because of the continuing profligacy of the Lambeth, Southwark and Lewisham authority?

Mr. Jenkin: I assure my hon. Friend the Member for Rochester and Chatham (Mrs Fenner) that it is the other areas in the South-West Thames region that have had to bear the brunt of the overspending by this authority in the past. I am given to understand by the commissioners that last month they were on course to ensure that expenditure would be within the cash limits this financial year. Perhaps I can add this, to reassure my hon. Friend: it is imperative that all units in the area should continue to exercise financial constraint for the remainder of the financial year and beyond. Uncontrolled spending now will only make the area health authority's task next year even more difficult.

Mr. English: We must all be grateful to the right hon. Gentleman for following the precedent of the late right hon. Herbert Morrison, although a little belatedly. We should also be grateful to him for proposing to restore this health authority slightly more than a month after judgment was given in its favour.
Now that the right hon. Gentleman has read the judgment, does he realise the distinction between its first, second and third conclusions? The second conclusion says that the advice on which he acted was seriously misleading. The third relates to his own personal actions. Why is the right hon. Gentleman asking members of this health authority to obey cash limits when even now he has not issued a direction under section 17 asking them to do so? In other words, the statutory duty that he says will be introduced for every health authority he could have introduced for this authority or any other by a direction under section 17. Why did he sack the members of that authority first instead of asking them, or laying a duty on them, to do what he is still only asking them to do in a non-formal way?

Mr. Jenkin: The hon. Member for Nottingham, West (Mr. English) certainly made his points clear when he spoke last week. However, it is a little hard for me to be charged with announcing a Bill belatedly when if I had decided to appeal against this judgment clearly a Bill would not have been necessary and the matter would have remained outstanding until the appeal had been heard.

Mr. English: So did Herbert Morrison.

Mr. Jenkin: I do not think that the Herbert Morrison precedent is on all fours with this case. There are other cases of Bills going through to validate past actions of the House and I think that each one has to be judged on the facts of its case. The main burden of the hon. Gentleman's case was to ask why I did not issue a direction under section 17. This was exactly the point put last Tuesday by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) who spelt out very clearly what the process would have been. It was stated in my affadavit to the court that I considered whether a directive under section 17 of the Act would have been appropriate, because if it had not been observed I would have been able to take powers, not under section 86 but under section 85, to dismiss the area health authority. The reason why I did not choose that course was one of timing. I was advised that it would have been necessary to delay so as to give the authority time to respond or fail to respond to the directive under section 17. I had in mind that five months of the year had already passed and that every month that overspending continued the task of bringing this authority back within its cash limits would have been that much more difficult. It was for that reason that I considered that urgent—indeed, emergency—action was necessary, although in the event it turned out that I did not take the action in accordance with the provisions of the section.

Mr. McCrindle: Given the unfortunate advice originally tendered to my right hon. Friend the Secretary of State, will he accept from me that to have achieved his financial objectives while obeying the letter of the law is, for some of us, a reason for congratulation rather than continuing condemnation?

Mr. Jenkin: I wish to make entirely clear, as I did on Tuesday, that I am answerable to this House for the activities of my Department. I accept that responsibility in full. That is why I am here today answering questions.

Mr. Tilley: Does the Secretary of State realise that while he may be able to achieve retrospective amnesty for his commissioners and their staff he can in no way compensate those of my constituents who had to suffer prolonged illness


and pain because of the illegal cuts in health services that he has imposed? Will he accept and recognise in the House that much of the tragic medical harm caused by this decision can never be put right?

Mr. Jenkin: I am not sure that that was a helpful contribution. If the health authority had done last August what the majority of its members agreed with me on Friday they would do in future, that health authority would have had to take some difficult and unpalatable decisions and I am far from clear that those decisions would have been necessarily different from the decisions taken by the commissioners after I appointed them. That will be a matter on which the health authority can comment when it reviews the decisions—as it no doubt will wish to do—once it has resumed control of the area. What is perfectly clear is that there are 90 area health authorities in England, and when 89 of them were prepared to take the decision to live within the cash limits and one was not, it was simply not tolerable that that authority should be allowed to continue to get away with it. The authority has now recognised that and I am grateful for its undertaking. I hope that the future will be happier than the past.

Mr. Mellish: This is a very sad, sorry and abject story. I regard it as appropriate that 1 April is the day on which the area health authority will be reinstated—especially for the present Government Front Bench. If the area health authority decides—I understand it is more than likely that it will do so—that the closure of the hospital in which I have great interest should never have taken place and had nothing whatever to do with the arguments about the cash limits to which the right hon. Gentleman refers, and decides to reopen that hospital, may I have a personal and categoric assurance from the right hon. Gentleman that he will not interfere as Secretary of State but will allow the authority to reopen the hospital?

Mr. Jenkin: I can tell the right hon. Member for Bermondsey (Mr. Mellish) that the date of 1 April was a date that was suggested first in court by the applicants' counsel and, secondly, in a letter from the council's solicitors when they wrote to me last week. I was happy to

accept that date. It seemed to me to be a sensible date which would allow for an orderly return of responsibility to the members of the authority.
As regards St. Olave's Hospital, I am well aware of and sympathetic to the right hon. Gentleman's profound concern for that hospital. I have made clear that it is open to the members of the authority to review the decisions that have been taken. I have no doubt they will want to do that, but they will have to work within the constraints of the money which will be made available to them in the next year. If the authority accepts that, there is no reason why I should not equally accept a decision that the authority may come to.

Mr. Moate: May I say to my right hon. Friend that it will not be a sad, sorry and abject story for others living in the South-East Thames region if this area health authority abides by the cash limits which in the past it has blatantly, flagrantly and persistently abused? The way in which my right hon. Friend has apologised to the House for what has happened reflects immense credit upon him

Mr. Jenkin: I am obliged to my hon. Friend.

Mr. Christopher Price: Will the right hon. Gentleman confirm that at the press conference on 1 August when he announced his policy—a press conference that I attended—he was warned that his action was illegal? Does he agree that he was warned on at least five subsequent occasions that he was breaking the law in approaching the matter in this way? Will he further confirm that his response to Mr. Stanley Hardy's letter in setting up the area health authority without constraints means that he has no intention of applying any section 17 directions within the 1980–81 financial year? Finally, when will King's College Hospital be able to resume fitting pacemakers?

Mr. Jenkin: If the hon. Member for Lewisham, West (Mr. Price) was able to say on 1 August, without having seen the terms of the direction, that the direction was illegal he must have second sight beyond the capability of most hon. Members. It is a fact that on every ground bar one on which the applicants' counsel


sought to upset my direction the argument was held to be wrong. Perhaps the hon. Member should consult his hon. Friend the Member for Nottingham, West (Mr. English) on the question of a section 17 direction. The hon. Member for Nottingham, West was asking me to put on a section 17 direction, and I gather that the hon. Member for Lewisham, West is implying that I should not make such a direction.
My answer is that I am considering whether a section 17 direction should be applied, but I have to bear in mind that there is a provision in the Bill now before Parliament which, if Parliament accepts the clause, and when the Bill becomes law, will apply an automatic statutory duty to all authorities to comply with their cash limits.
The question of cardiac pacemakers at King's College Hospital is a matter for the local management to decide in conjunction with the consultants, but I emphasise that all units in this area must continue to constrain their expenditure or they will make the task of the area health authority when it resumes control after April even more difficult.

Mr. Pavitt: Is the Secretary of State aware that the rigid application of cash limits on this and all other authorities has a multiplicity of short-term and long-term results? Therefore, will the right hon. Gentleman publish a document to enable the health authorities and all those working in the Health Service, people who have to operate within the limits, to be aware of those consequences? Is he aware of the effect on nursing ratios in the four years following the year in which the cash limit is applied? Is he aware of the bonanza of equipment spending that took place in February this year in order to spend certain sums—within cash limits, it is true?

Mr. Jenkin: The hon. Gentleman's questions go a little wider than my state- ment. With the cash limit regime we are using the same machinery that our predecessors established and which, as I think is now widely recognised, is essential in order to constrain public spending within the limits established by the Cabinet.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call two questions from the Opposition Front Bench and one Opposition Back Bencher. Clearly, the House will have a chance to debate the matter at greater length if legislation is on its way.

Mr. Archer: Does the Secretary of State accept the proposition which he says was put to him by the solicitor for Lewisham council, namely, that when the authority resumes control it will have freedom of action to review decisions taken by the commissioners? If that is so would it not follow that those who believe that they have acquired contractual rights may find them revoked? Is it proposed in the indemnity Bill to deprive these people of a remedy?

Mr. Jenkin: I would have thought that I had broadly accepted the point that was put to me by Mr. Joy, the borough solicitor, that the authority, on resuming control, should be entitled to review decisions. But it seems to me that the consequences of any Bill—and doubtless the right hon. and learned Gentleman will wish to examine carefully the terms of the Bill—would be to validate the decisions that have been taken by the commissioners in the meantime in order to create the certainty which it must always be part of the process of law to create. If the members of the authority then wished to change the decision which had been made by the commissioners, they would do so in the full knowledge of any legal consequences of making those changes. However, these are matters which we shall no doubt wish to examine in greater detail when we come to the Bill.

Mr. Race: Given that the Lambeth, Southwark and Lewisham area health authority (teaching) will be reorganised, as will be every other area health authority under clause 1 of the Health Services Bill, will the Secretary of State give an assurance that the cash limits for the Lambeth, Southwark and Lewisham authority will imply that no variations to services to patients need take place in 1980–81 until the reorganisation envisaged in the Bill is effective?

Mr. Jenkin: I do not think that it would be for me to give such a direction to the area health authority. Every area health authority is always concerned to


look at its priorities and to ensure that the totality of its spending is the best that it can organise for the purposes of serving the public who live and work in the area.
On restructuring, it has been widely felt for some time that this area would benefit from restructuring on the lines perhaps of the proposals outlined in "Patients First". The Government intend that the structure of all health authorities should be reviewed on those lines, and it would certainly be worth considering the Lambeth, Southwark and Lewisham area in the context of that review.

Mr. Moyle: Will the right hon. Gentleman confirm—and this is what the chairman of the area health authority was on record last July as having said—that the first communication that he received from the Secretary of State was one which sacked him and his authority? How does he square that with the attempts said to have been made to persuade the area health authority to toe the Goverment's line?
It is not clear what happens to those who have sold goods to the area health authority. Will they be paid? What happens to people who have been promoted since last July? Will they be held to have drawn illegal increases in salary?

Mr. Jenkin: The procedures which were adopted before I purported to give a direction were clearly spelt out in my affidavit to the court, and are clearly on record in the judgment of the court. I think that I do not need to elaborate on that now.
It is precisely in order to avoid the kind of difficulties to which the right hon. Gentleman is referring that we have now considered it necessary to introduce a Bill. Notice has been given today and the Bill will be available and printed tomorrow. There is a draft Bill in the Vote Office now. If we did not have a Bill, having now decided not to appeal and to accept the judgment, there would be a risk that decisions that have been taken whether on promotion, the purchase of goods, the dismissal of staff, or a whole range of other matters, could be open to attack in the courts on the ground that the decisions were not properly taken. It must be in the interests of the entire House, of the area and of the NHS that

that situation is remedied just as swiftly as possible.

Mr. Cryer: On a point of order, Mr. Speaker. The subject we have just been discussing is a matter of a Minister accepting responsibility for a serious error of judgment. Yet again, a copy of the statement was not provided for right hon. and hon. Members which, if provided, would have given us greater information. However, as the Minister stood up to make his statement, copies of it were being handed round to the press. I see no reason why the press should not have them, but, equally, I think that Members of Parliament should have copies in advance so that they are better informed and can ask better informed questions, particularly where a Minister who admits that he has made a serious misjudgment is coming to answer to the House.
We cannot simply leave this matter to the discretion of the odd Minister who feel some sort of obligation to provide Members with a statement as well as providing them for persons outside. Can you use your influence, Mr. Speaker, to press on all Ministers to issue their statements in the Vote Office in advance as a matter of course?

Mr. Speaker: The hon. Gentleman knows, as the House does, that he has raised that question with me on another occasion. It is a long-established custom, so I understand, that copies of statements are handed out for those who have to report them. I have heard and understood the point which the hon. Gentleman has raised, but it is not a matter within my discretion or control.

Mr. Price: Further to that point of order, Mr. Speaker. The Secretary of State said that the Leader of the House would make a business statement on when we might consider the Bill, which, if passed, is to be cited as the National Health Service (Invalid Direction) Act 1980. May we have an assurance now from the Leader of the House that he will not rush that business through this week and that he will give us all due time to consider the matter?

Mr. English: Further to the point of order, Mr. Speaker. I wonder whether you could confirm that there are two


sorts of Act of Indemnity—the non-controversial sort, when the Bill goes through all its stages instantaneously on the Floor of the House, and the more controversial sort, which it has been customary upon occasion to refer to a Select Committee? The latter would seem an appropriate procedure in this case. A Select Committee can call evidence and determine who misadvised the Minister, how far he himself was responsible for his own official action, and so on. Will you confirm, Mr. Speaker, that there are those two sorts of precedent?

Mr. Speaker: It is not for me to decide the course which will be followed in connection with this Bill. What I am quite sure is that we have not heard the last of it.

HANDICAPPED CHILDREN (EDUCATIONAL TREATMENT)

The Secretary of State for Education and Science (Mr. Mark Carlisle): With permission, Mr. Speaker, I wish to make a statement on the Warnock report on the special educational needs of handicapped children.
The committee under the chairmanship of Mrs. Warnock presented its report in March 1978. Shortly afterwards, a consultation document was issued to seek the views of the many organisations concerned with the education, health and welfare of the handicapped. Their responses were almost wholly favourable. In addition, a thorough interdepartmental study of the report's recommendations has now been made and completed within the Government. In view of the anxieties expressed on both sides of the House during discussion of the provisions of clause 9 of the Education (No. 2) Bill, my right hon. Friend the Secretary of State for Wales and I have decided that it would be right to announce at once the Government's response to the report. My right hon. Friend the Secretary of State for Scotland will be dealing separately with the application to Scotland.
The central recommendation of the report was that, in the light of the experience gained since the passing of the Education Act 1944, the concept of special educational treatment appropriate to defined categories of bodily or mental handicap should be replaced by that of the special educational needs of individual children. Such a change, which would reflect enlightened current practice, was welcomed by the bodies which we consulted. The Government accept the arguments in the report for changes in the current statutory provisions relating to special educational treatment and intend to introduce early legislation to enact a new framework substantially on the lines recommended in the report. The new legislation will incorporate provisions designed to safeguard the interests of children with severe or complex special educational needs, including arrangements for more widely based assessment and for the recording of individual needs.
The legislation will also define and protect the rights of parents to adequate information and consultation about the


education offered for their children, taking account of the relevant recommendations of the report and in the spirit of the provisions about information and parental preference embodied in the Education (No. 2) Bill.
Many of the other recommendations in the Warnock report were addressed not directly to the Government but to those concerned with the local provision of education, health and welfare services. Some recommendations—for example, those relating to nursery education, teacher training and further and higher education—have major implications for central and local government expenditure, and their implementation must be considered in the light of the economic situation and the need for restraint which it entails. The Government's current expenditure plans provide for the maintenance of expenditure on special education at its present level, despite the fall in the size of the relevant age groups.
We propose to lay before Parliament in due course a White Paper outlining the form that the new legislation might take and dealing with other recommendations made by the Warnock committee.
In conclusion, I wish to congratulate Mrs. Warnock and the members of her committee on their carefully presented consideration of the many issues surrounding the education of handicapped children and young persons. Their report will, I am sure, be a constant source of reference for many years to come for all with an interest in the development of special education.

Mr. Kinnock: I endorse the right hon. and learned Gentleman's thanks to the Warnock committee, and I add my own expression of admiration for the work which it undertook. May I commend also those organisations and individuals, some of them in this House, who have campaigned so hard for progressive developments in educational provision for those with special learning difficulties?
In view of the work which has been done, is not the Government's reaction a shallow and somewhat ineffectual response to so much earnest and authoritative work undertaken by the Warnock committee and others? Nevertheless, I welcome the right hon. and learned Gentleman's decision to accept the argument for

changing the legislative categories from the rather narrow definitions of handicap and subnormality. Does his undertaking to enact a new framework mean that we shall have a broader, more sensitive and more sensible definition of special educational need which is related to the individual characteristics of individual children who suffer from behavioural and emotional disorders as well as from physical and mental handicap and retardation?
When shall we see the White Paper which the Secretary of State has announced? Second, and more important in a sense, why do we in this place and parents and others, outside who are concerned with these matters have to wait at least another eight months for a Bill, another year for enactment and another 18 months for its operation? Is this not an unwarranted delay, especially since there has already been exhaustive consultation over two years and there is ample scope in the Education (No. 2) Bill, now in the House of Lords, to make these changes of definition and changes in the scope of parental rights, which were recommended in the course of debates on the Bill both by us on these Benches and by the hon. Member for Exeter (Mr. Hannam) and other hon. Members on the Government Benches? Does the delay arise because the Secretary of State is perhaps trying to head off a threatened rebellion in the House of Lords, or because he cannot yet decide what the extent of choice and parental rights should be for those who have children with special educational needs—which, I recognise, is a complex matter?
Does the right hon. and learned Gentleman propose in the new legislation to remove section 10 of the 1976 Act, as has been rumoured in the press, and, if he does, will that be because he has abandoned any hope of getting the vital additional resources necessary to make integration of children with special educational needs into ordinary schools a practical and acceptable possibility? If he does not remove section 10, will he now specify a date on which under that Act the process of integration can become legally required and operated?
On the question of resources, since this was a matter of some concern dealt with in his statement, will the Secretary of State accept that the recommendations in


much of the Warnock report emphatically urged the commitment of what Mrs. Warnock called substantial additional resources? Even in the current economic situation, cannot the right hon. and learned Gentleman make additional provision to meet the first priorities of the report, as Mrs. Warnock called them, that is to say, new provision for under fives and over-sixteens who have special educational needs and, very important, the extension and improvement of initial and in-service training of teachers of children with special educational needs?
What steps will the Secretary of State take to ensure that the Government's professed intention to maintain expenditure on special education at its present level will be fulfilled by local education authorities, especially those authorities which may be tempted to transfer resources from special education into ordinary education under the pressure of the cuts which are being felt in local education authorities and schools of all descriptions?
Finally—[HON. MEMBERS]: "Too long".] The report has been out for two years, there has been a year of consultation, there is widespread interest and concern, and there is a Bill now before the House of Lords. I am sorry that this is one of the few opportunities that we have for intensive questioning.
Does the right hon. and learned Gentleman accept that the change of definitions will have major financial implications in that 15 to 20 per cent. of British schoolchildren may now legally have an entitlement to special education during periods of their educational life? If he does not accept that view, does he admit that his statement has much more to do with words than it has with actions? If that is the case, what should not be a matter of contention and controversy between the two sides of the House may become so, to the detriment of all concerned.

Mr. Carlisle: The hon. Gentleman asked a fair number of questions and I shall do my best to answer them. First, I appreciate what he said about those who served on the Warnock committee, and I join with him in recognising the role played by various hon. Members on both sides as well as those outside who have expressed concern for handicapped children.
The hon. Gentleman's overall description of my response as a shallow one was somewhat surprising in view of the fact that there was only one real direct recommendation to Government, namely, the changing of the legislative framework. I stated that the Government accepted that major recommendation and that they proposed to legislate to carry it into being. In view of the recommendation to Government, it is difficult to know what more I could have done which would have avoided the accusation of being shallow in my response.
The hon. Gentleman is quite right about what the framework will be. As I made clear in my statement, the whole purpose of changing the legislative framework is to introduce a framework in accord with the general recommendations of the Warnock committee, which are to get away from the narrow categorisation of bodily and mental handicap and instead to provide a much broader framework for children in general special educational need.
I was somewhat surprised by the hon. Gentleman's criticism of unwarranted delay in my statement about the Bill. I remind him that the Warnock committee made 225 separate recommendations.

Mr. Kinnock: Two hundred and twenty-four.

Mr. Carlisle: If one adds Scotland, there are 225. There are 224 for England and Wales.
I remind the hon. Gentleman that the Warnock committee was set up when my right hon. Friend the Prime Minister was Secretary of State for Education and Science. It took Mrs. Warnock and her committee nearly four years to report. They reported in March 1978. The then Government went out to consultation, inviting reactions by the end of February last year. I do not think that it is at all unreasonable, in view of the length and complexity of the report, to be in a position to announce within a year of taking office our reaction to that report. It has nothing to do with the Education (No. 2) Bill, which is now in another place, save to say that, as hon. Members on both sides raised the issue of the relationship of information and parental choice to those in special schools, I thought it right to announce at once our decision with regard to the Warnock report.
I accept what the hon. Gentleman said about resources. The Warnock report makes it clear that its recommendations as a whole will mean substantial additional resources. But it is also right to point out that the Warnock committee recognises that the first necessary stage is to change the legal framework and to accept that the recommendations will come in step as resources become available. That is why I thought it right to make clear in my statement the resource implications that would have to be considered in the light of the economic situation.
As to the hon. Gentleman's two final points, he tightly said that I could provide that money spent on special schools should be similar next year to what it is this year. I cannot force local authorities to spend their money in that way, any more than I can dictate any other form of educational expenditure. I can only say what the Government propose, and advise and hope that local authorities will react in this sensitive area. I do not accept that the change of definition itself has wide financial implications. I accept that the implementation of the whole of the report has wide financial implications. But Mrs. Warnock's central proposal was a change to a broader framework of understanding of the problems of the disabled, a much changed system of assessment, a much more parental involvement and a much greater ability to record different degrees of educational need without the financial implications which the hon. Gentleman suggested.

Mr. Beith: While the Secretary of State's acceptance of the main Warnock principle is welcome, would not it be fairer to all the parents to make it quite clear that, against a background of present cuts, the implementation of many of the proposals will take a long time indeed and that there may be little progress? Would it not be better to avoid the kind of situation that arose following the implementation of the Chronically Sick and Disabled Persons Act, when many false expectations were raised? Will the, right hon. Gentleman again consider the question of school meals and transport charges in relation to handicapped children when he is considering this matter?

Mr. Carlisle: I carefully pointed out in my statement that there were resource implications and that they must be considered in the light of the economic situation. I do not accept that that is a reason for delay in going ahead with the change in the framework, because I believe that that is a necessary first step. There are many parts in that, such as the question of assessment, the type of assessment, the type of discussion with parents and the sort of proposals recommended for the recording of information about children, which could well be implemented with advantage to the parents and the children without resource implications.

Mr. Hannam: Will my right hon. and learned Friend accept our congratulations for the speedy implementation of the undertaking that he gave during th. Report stage of the Education (No.2) Bill? Can he give some idea of the time gap between the implementation of that Bill and the introduction of the proposals in the Warnock report?

Mr. Carlisle: Yes, I shall.
I apologise to the hon. Member for Bedwelty (Mr. Kinnock) because I failed to answer one of his questions. He asked when it was hoped that the White Paper would be presented. The best answer I can give is the early summer.
As to legislation, obviously I cannot anticipate the contents of the next Queen's Speech. However, I can stick to the phrase "early legislation", and I express the hope that the new legislation on Warnock will reach the statute book at a date prior to the implementation of clauses 6, 7 and 8 of the Education (No. 2) Bill.

Mr. J. Enoch Powell: The right hon. and learned Gentleman indicated how the proposed changes in law and administration will be implemented in two of the three parts of the United Kingdom for which other Secretaries of State are responsible. He will be aware that law and practice in Northern Ireland has not been identical with that in Great Britain, but presumably he will not deny that these considerations apply equally to all parts of the United Kingdom. Can he indicate when an announcement will be made in relation to Northern Ireland, and what form and character it will take? Would not it be generally more advisable,


when statements of Government policy of this kind are made, if they included some reference to the fourth part of the United Kingdom?

Mr. Carlisle: I am grateful to the right hon. Gentleman for raising the question of Northern Ireland, because it is right that it should be raised. As he will know, the terms of reference of the Warnock committee did not extend to Northern Ireland, and its report is not, therefore, a direct commentary on special education in Northern Ireland. Having said that, I understand that the report is of considerable interest to those in Northern Ireland concerned with the education of handicapped children, and I understand that my right hon. Friend the Secretary of State for Northern Ireland will consider, with his ministerial colleagues, the need to take action in the light of the announcement that I have made this afternoon. I shall certainly draw to my right hon. Friend's notice the question raised by the right hon. Gentleman as to the form of any statement which he might care to make.

Mr. David Price: Is my right hon. and learned Friend aware that both sides of the House welcome his statement, particularly that part in which he said that he broadly accepts all of the recommendations of Mrs. Warnock? Is he also aware, as has been pointed out, that their full implementation will require resource priorities and that many Conservative Members would regard the fulfilment of Mrs. Warnock's recommendations as a high priority in the social sphere?

Mr. Carlisle: I note what my hon. Friend says. I am grateful to him for his general support.

Mr. Christopher Price: Will the right hon. and learned Gentleman confirm that he will leave the duty to supply special education within the Education Act 1944 in the new legislation that he brings forward? In doing that, will he take into account Lord Alexander's suggestion in another place that that section of the Bill be amended to include gifted children to make unnecessary the assisted places scheme? Will the right hon. and learned Gentleman consider doing it in that way?
Secondly, are there any changes contemplated in bringing the salaries of

teachers in special schools more into the broad structure of the Burnham committee?

Mr. Carlisle: The salaries of teachers is a matter for the Burnham committee and for negotiations with the committee.
The hon. Gentleman's first question enables me to answer another of the many questions asked by the hon. Member for Bedwellty (Mr. Kinnock). The hon. Gentleman will realise that a totally different concept is being proposed by Mrs. Warnock from the duty under the 1944 Act, or from section 10 of the Education Act 1976, which was an intention to alter the presumption in the 1944 Act. I think it right to ask the House to wait and see the terms of the White Paper and what the Government say on the general issue of integration that will appear in it.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose—I wish that I had risen earlier to say so—to call those hon. Members who have been rising to question the Secretary of State for Education and Science. When that has been done, I think that it would be unfair to the House to remain any longer on this issue.

Mr. Eldon Griffiths: Does my right hon. and learned Friend agree that an important part of the education of both the physically and the mentally handicapped is education in sport and physical recreation? In the context of the Warnock report, will he lend his support to paraplegic children's education, with particular reference to the excellent work that is done at Stoke Mandeville? Secondly, will he give his support to the special Olympics, which this year brought together about 4,000 mentally handicapped children from 15 countries? As such an Olympics is intended to be held in Britain, will he give it his general support?

Mr. Carlisle: I recognise the importance of education in sport for those who are physically handicapped. I shall bear in mind my hon. Friend's remarks. I think that everybody welcomes the opportunity that paraplegic children now have to compete with their fellows from other parts of the world.

Mr. Douglas: I am mindful of the right hon. and learned Gentleman's responsibility for England and Wales. However, will he give us some assurance about the timing of legislation for Scotland? Will he pass that on to his right hon. Friend the Secretary of State for Scotland, who is absent today? Will he give an indication that the consultations will be short? The Warnock committee began its work in 1973, a very long time ago for those who are the subject of the report.
If we are to talk merely of meeting the central recommendations, that will do severe damage to the morale of those engaged in this form of work. We talk about shortages of resources, but there are resources for which the Secretary of State has direct responsibility, namely, the training, for example, of occupational therapists and physiotherapists. Such people are vital—I speak with a specific interest as I have a young daughter who is a spastic—in ensuring that these young people, especially as they move into their teens and into adulthood, get a fair chance in our competitive society.

Mr. Carlisle: I understand that the Under-Secretary of State for Scotland was in the Chamber until a moment ago. My hon. Friend had been present since 3.30 pm. As the hon. Gentleman says, the position in Scotland is slightly different. I shall ensure that his comments are conveyed to my right hon. Friend the Secretary of State for Scotland. As the hon. Gentleman will appreciate, I have no ministerial responsibility for special schools in Scotland. I understand that my right hon. Friend has answered a written question that appears on today's Order Paper, which I hope the hon. Gentleman will have an opportunity to study. Following that, he will be able to ask any question of my right hon. Friend that arises from the written answer.

Mr. Costain: Is my right hon. and learned Friend aware that his statement on financial choice will be especially welcomed by the parents of these unfortunate children? Will he confirm that provision will be made regardless of county boundaries? Will he make a point of ensuring that special funds are available as early as possible to avoid disappointment?

Mr. Carlisle: I must ask my hon. Friend to await the forthcoming White

Paper, in which we shall set out our general legislative proposals. On this occasion I must limit myself to what I said in my statement, namely, that our proposals will be in the spirit of the provisions that exist in the Education (No. 2) Bill, which is now passing through another place.

Mr. Foulkes: Is my right hon. and learned Friend aware that this is the second occasion within a week when a major oral statement has been made affecting England and Wales, following which hon. Members representing England and Wales may ask and have answered their questions—the other statement concerned housing—whereas Scotland has been dealt with by means of written answers? That means that Scottish Members have no opportunity to ask questions and to receive answers. Does the Secretary of State agree that this is most unfortunate? Does he further agree that it would not have arisen if we had had a Scottish Assembly?

Mr. Carlisle: The first part of the hon. Gentleman's question concerns a matter that he will have to take up with my right hon. Friend the Leader of the House. It is not for me. I do not propose to comment on the hon. Gentleman's second question.

Mr. Greenway: I welcome the statement of my right hon. and learned Friend on the movement towards implementing the important recommendations made by the Warnock committee. As it will be a lengthy and fundamental process for the schools, I invite my right hon. and learned Friend to comment on the deep implications and the effect that it will have upon schools that take children with a certain form of handicap. Of course, I welcome such an arrangement. It will have a valuable effect on children in the schools. However, it might be difficult to move into a situation in which more than one area of handicap is taken. That will require deep thought and consultations with teachers and everyone concerned. May I have my right hon. and learned Friend's view?

Mr. Carlisle: I do not think that our implementation of the Warnock committee recommendations will necessarily have the consequences that my hon. Friend fears. In the report Mrs.


Warnock makes it clear—she takes a much wider definition of education need and recognises that it will cover many who now require remedial education during different parts of their school life—that those who have serious educational need for which provision is not generally available in the ordinary sense will be recorded as such. The local education authority will have to assess whether there is availability in an ordinary school for their education or whether they should, in view of their degree of disability, go to a special school in consultation and, it is to be hoped, in agreement with the parents. Therefore, it is not intended by Mrs. Warnock that there should be no role for the special school. There is a wider area of educational need, a wider area of assessment and a greater degree of flexibility between the different areas of assessment.

Mr. Carter-Jones: I very much welcome the statement. The implementation of the Warnock committee's recommendations might involve increased expenditure on access, adaptation of buildings and mobility. Will the right hon. and learned Gentleman's Department undertake to meet such costs? Will he make it mandatory for the parents of handicapped children to be represented on any governing bodies that are established?

Mr. Carlisle: One of the specific recommendations is the representation of the local authority on the governing body of any school. I shall consider parental governing representation. I hope that that is one of the matters that we shall be able to deal with in the White Paper. Such representation would be in accord with the Education (No. 2) Bill, which provides for elected parents on other bodies.
I turn to the hon. Gentleman's first question. I know that he was unable to be present when I made my statement. I cannot go beyond what I said at that stage. Undoubtedly there are substantial resource implications in certain of the recommendations of the Warnock committee's report. Their implementation will have to be considered in the light of the economic situation and the need for restraint that that entails.

Mr. Dalyell: Has a policy decision been reached on recommendation 733?

It is contained in a formidably argued, well written and highly readable report. Recommendation 733 proposes that every resource centre, special class or place that is organised internally by the head teacher can have as much material support related to its needs as would have been given formerly to one designated by the local education authority. Some of us believe that this is an important recommendation. Has any conclusion been reached?

Mr. Carlisle: I realise that the recommendation about resource centres in major secondary schools is important. It is also an important suggestion that certain special schools might become resource centres as numbers drop in those areas. However, as I have made clear, these recommendations were addressed to local education authorities rather than to the Government. Although we may make some comment in the White Paper, the hon. Gentleman should direct his questions to them.

HUMAN TISSUE TRANSPLANTS

Mr. Dalyell: My hon. Friend the Member for Brent, South (Mr. Pavitt) and I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the decision of the Leicester coroner to require confirmation in writing of applications for transplants to be carried out within his jurisdiction.
You may recall, Mr. Speaker, that I asked the Government one Friday if a statement was forthcoming. I notice that the Minister of State, Home Office, has done me the courtesy of sitting on the Front Bench. He will recollect that I asked an oral question last Thursday seeking an answer giving guidelines to coroners. The Leicester coroner has demanded that in future an application must be made in writing before a transplant takes place. This issue goes far beyond the boundaries of Leicester. It affects the whole of the United Kingdom. The issue is important, because probably at least 13,000 people wait each year for matching kidney tissues. The House will know that deterioration sets in within half an hour. If written confirmation and other so-called safeguards are required it


will be difficult, and in many cases impossible, to obtain matching tissue. The practice of the past few years has led to a dramatic increase in the number of successful transplants.
The issue is urgent because doctors are understandably loth to become entangled with coroners. Doctors feel inhibited about asking relatives such a dreadful question. They have to ask relatives at their moment of maximum grief whether they will consent to the organs of their loved ones being removed. This matter is urgent because it affects hundreds of people who may be expecting the phone to ring. They may be lucky and they may obtain some type of matching tissue.
On Thursday the House recognised that the general issue was important. I argue that this is a matter for urgent debate. It cannot be raised under any other guise.

Mr. Speaker: The hon. Member for West Lothian (Mr. Dalyell) gave me notice before noon today that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the decision of the Leicester coroner to require confirmation in writing of applications for transplants to be carried out within his jurisdiction.
I listened with deep care to the hon. Gentleman, and especially to his last sentence. I am not allowed to give the House the reasons behind any decision in connection with an application under Standing Order No. 9. I gave careful consideration to the representations of the hon. Gentleman, but I have to rule that the hon. Gentleman's submission does not fall within the provisions of Standing Order No. 9. And, therefore, I cannot submit his application to the House.

FISHING INDUSTRY, HULL

Mr. McNamara: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the rapidly deteriorating position of the Hull fish docks and the probability that at the end of this week facilities will no longer be available

in Hull, once the major fishing port of Europe, to discharge fishing vessels.
It is barely a fortnight since the House discussed the fishing industry. Since then the port of Hull has rapidly deteriorated. The matter is therefore specific in that it relates to the port of Hull. It relates to the fishing industry in Hull and to industry dependent on it. That the issue is important is self-evident. Hull suffers from increasing unemployment. It has suffered a great number of economic blows. The issue is urgent because the vessel owners are going into liquidation. A new company is being formed to take over part of their responsibilities. However, no provision has been made for the employment of men to discharge vessels, or for the retention of equipment that is capable of discharging vessels. When the company goes into liquidation on Friday, and when assets are apportioned, they will have only a scrap value and not a material value. Thus, for Hull, nearly a century of history as a leading fishing port in Britain will come to an end.
Efforts have been made to contact the British Transport Docks Board—the major creditor—and the Department. I am glad that the Parliamentary Secretary is here, as I understand that his other colleagues are in Brussels. The people of Hull regard the deterioration of the docks as a major blow to their economy and to the general spirit of the town. It is an urgent and specific matter and it deserves the attention of the House and of the nation. Notice should be taken of what is happening to a proud, brave and resourceful industry.

Mr. Speaker: The hon. Member for Kingston upon Hull, Central (Mr. McNamara) gave me notice before noon that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely:
the rapidly deteriorating position of the Hull fish docks and the probability that at the end of this week facilities will no longer be available in Hull, once the major fishing port of Europe, to discharge fishing vessels.
The hon. Gentleman knows that I do not decide whether this issue is to be discussed. I merely decide whether it should be debated tonight, or tomorrow night. He has undoubtedly raised a very important matter. As the House knows,


under Standing Order No. 9 I am directed to take account of the several factors set out in the order, but to give no reason for my decision. I listened with care to the hon. Gentleman, but I have to rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

BUSINESS OF THE HOUSE

Ordered,
That, at this day's sitting, Standing Order No. 4 (Prayers against statutory instruments, &amp;c, (negative procedure)) shall apply to the Motion relating to the Road Traffic Accidents (Payments for Treatment) (England and Wales) Order 1980 with the substitution of half-past Eleven o'clock or one and a half hours after it has been entered upon, whichever is the later, for the provisions in paragraph (1) of the Standing Order.—[Mr. Waddington.]

Orders of the Day — COMPANIES BILL [Lords]

As amended (in the Standing Committee), further considered.

Clause 40

RESTRICTION ON DISTRIBUTION OF ASSETS

Mr. John Smith: I beg to move amendment No. 56, in Page 48, line 42 at end insert—
'(6) A Company to which this subsection applies shall not after the appointed day apply its assets in furtherance of political objects otherwise than in accordance with the provisions of Schedule (Distribution of profits and of assets for political objects) and shall accordingly act in relation to distributions in accordance with that Schedule.
(7) Where, in accordance with subsection (6) above, a company transfers into its political fund an amount otherwise payable to a member by reason of a distribution that member shall not at any time have any proprietary interest whatsoever in that amount.
(8) Where, in accordance with subsection (6) above, a company transfers an amount into its political fund, the computation of its net assets in the relevant accounting reference period for the purposes of subsection (1) (a) above shall be deemed to exclude an amount equal to that amount.
(9) In subsection (8) above "the relevant accounting reference period" means that period prescribed by regulation made by statutory instrument by the Secretary of State.
(10) Subsection (6) above applies to a public company, and to a subsidiary of a public company; and in this subsection "public company" includes, nothwithstanding section 8(2) or any other provision of this Act, an old public company from the appointed day.'.

Mr. Speaker: With this we will take the following amendments:

No. 57, in clause 41, page 51, line 3, at end insert—
(14) The Secretary of State may by regulation made by statutory order apply section 40(6), (7), (8), (9), (10) and Schedule (Distribution of profits and of assets for political objects) to investment companies with such variations in the provisions of the said Schedule which he considers appropriate:—
Provided that no such regulation shall abrogate or vary the provisions of the said Schedule concerning: the restriction of the application of a company's assets to political objects to applications of assets only from its political fund; the requirement for an ordinary resolution in general meeting authorising such a


political fund; the requirement that the political fund must be financed out of sums otherwise distributable to members and not otherwise; the rights of exempt members; and the definition of "political objects.".'.

No. 58, in clause 42, page 51, line 33, at end insert—
(3) Section 40(6), (7), (8), (9) and (10) Above shall apply to insurance companies with such variations in those subsections and in Schedule (Distribution of profits and of assets for political objects) as the Secretary of State may prescribe by regulations made by statutory instrument.'.

No. 157, to insert a new schedule:

'DISTRIBUTION OF PROFITS AND OF ASSETS FOR POLITICAL OBJECTS

1. The assets of a public company shall not be applied, either directly or in conjunction with any other company, association or body, or otherwise indirectly, in furtherance of the political objects to which this Schedule applies, (without prejudice to the furtherance of any other political objects) unless the furtherance of those objects is within the capacity of the company under the provisions of its memorandum of association and has been approved by an ordinary resolution of the company in general meeting in accordance with the provisions of its articles of association and in accordance with regulations made by statutory instrument by the Secretary of State.

2. Regulations made by statutory instrument by the Secretary of State under this Schedule shall include provision:

(a) to ensure that notice of the general meeting includes the terms of the said ordinary resolution and an explanation by the directors of the company of the nature of the proposed political fund;
(b) to require the directors to make that resolution, together with a statement of the terms entitled to the said notice not less than 28 days before the general meeting;
(c) to require the directors to make similarly available at the same time a written statement of the right of members to be exempt as described in the following provisions of this Schedule, together with the necessary notice in such form as he shall prescribe, whereby members may establish their right to be exempt members;
(d) to ensure that, in voting upon such an ordinary resolution, no share shall, on a poll, carry a greater number of votes than it would carry in relation to the generality of matters to be voted on at a general meeting of the company (and where a share carries special voting rights different from those of the same nominal value, the "generality of matters" shall be construed in this sub-paragraph as referring to matters in relation to which the share carries no special voting rights);
(e) to make such provision as is in his opinion necessary to give effect to paragraph 4 below concerning subsidiary companies;

(f) to regulate the methods of calculation of payments to exempt members as provided by paragraph 7 below;
(g) for any other purpose necessary in his opinion for the effective operation of this Schedule.

3. Where a company has passed an ordinary resolution in accordance with the provisions of this Schedule for the furtherance of political objects, it shall establish a separate fund (in this Schedule referred to as "the political fund"); and any application of the assets of the company in furtherance of political objects within the meaning of paragraph 1 above shall be made or financed only out of that fund and by no other application of the assets of the company whatsoever.

4. Where a subsidiary of a public company has passed an ordinary resolution in accordance with the foregoing provisions of this Schedule for the furtherance of political objects, it shall not establish a political fund unless and until an ordinary resolution has been passed in accordance with the foregoing paragraphs of this Schedule in a general meeting of its holding company approving the establishment of a political fund by the company.

5. Section 143(1) of the Companies Act 1948 (Registration and copies of certain resolutions and agreements), shall apply to ordinary resolutions passed for the purposes specified by the foregoing paragraphs of this Schedule, which shall accordingly be forwarded to the registrar of companies and recorded by him.

6. (1) No assets of a company shall be transferred into its political fund other than amounts available for distribution.

(2) At the time of the declaration or other announcement of any distribution, interim or otherwise, the directors of a company which has registered a resolution under paragraph 5 above shall state what amount, if any, the company proposes to transfer to its political fund and date, being not less than one week and not more than one month following such declaration or announcement, at which such transfer will be made.

(3) Where a statement is made under subparagraph (2) above, any member being an exempt member shall be entitled to receive:

(a) that part of the dividend or other distribution to which he is entitled as a member of the company; and
(b) a further distribution representing such proportion of the amount to be transferred to the political fund as would have been payable to him as a member if the said amount had been included in the total amount of the dividend or other distribution so declared or announced.

(4) Where an exempt member is entitled to a further distribution under sub-paragraph (3)(b) above, the directors shall, before effecting the transfer, deduct the amount of that further distribution from the amount to be transferred to the political fund and apply it for the purpose of that further distribution.

7.—(1) This paragraph applies to a company of which the share capital is divided into shares of different classes.

(2) Where the articles of association contain no provision for the method of calculating the different amounts payable by virtue of paragraph 6(3)(b) above to exempt members of different classes, that method shall be prescribed by the Secretary of State by regulation made by statutory instrument.

(3) After complaint to him by an exempt member of a company that any such method of calculation provided for in the articles of association is unfair, the Secretary of State may after consulting the directors of the company and any other person appearing to him to have an interest by regulation made by statutory instrument, render void any provision in the articles of association prescribing such method, if it appears to him necessary so to do in order that different classes of member be treated fairly.

(4) Where a regulation is made under sub paragraph (3) above, the Secretary of State shall publish his reasons for regarding the method provided for in the articles of association as unfair, and may substitute for that provision a method prescribed by regulation made by statutory instrument.

8. In this schedule an "exempt member" means—

(a) any member who voted, whether by proxy, on a poll, or otherwise, at the general meeting of the company against the adoption of the ordinary resolution required by paragraph 1 above; or
(b) any member who lodges at the company's registered office a notice in prescribed form stating that he wishes from the date of receipt of such notice to be an exempt member of the company.

9. An exempt member shall continue to be exempt so long as—

(a) in respect of a member falling within paragraph 8(a) above, he does not communicate to the company in writing his consent to the establishment of the political fund; or
(b) in respect of a member falling within paragraph 8(b) above, he does not in writing withdraw his notice lodged with the company.

10. Notwithstanding any provision in a company's memorandum or articles of association, but subject to paragraph 7 above, an exempt member shall not be excluded from any benefits or placed in any respect either directly or indirectly under any disability or disadvantage by the company as compared with other members of the company (except in relation to the control and management of the political fund) by reason only of his being so exempt, save as expressly provided by this Schedule and no person shall be excluded from membership of a company by reason of his intention to become an exempt member; and any provision in the memorandum or articles imposing any such exclusion, disability or disadvantage shall be void.

11. The following words shall be added to section 110(1)(a) of the Companies Act 1948 (Register of Members):
and, in the case of exempt members within the meaning of the Companies Act 1979,

the designation (E) before the name of each such exempt members.

12. Where an exempt member has agreed to sell or otherwise transfer his shares, the company shall, on receipt of the instrument of transfer, notify the purchaser or, as the case may be, transferee of the fact that the member is an exempt member and that the purchaser or, as the case may be, transferee will be an exempt member unless and until he communicates in writing to the company his wish not to be an exempt member.

13. Where shares owned by an exempt member are transferred by reason of the death of that member or by operation of law, the company shall, before it enters the name of any new holder of such shares upon its register of members, notify such holder that he will be an exempt member unless and until he communicates in writing to the company his wish not to be an exempt member.

14.—(1) Where a member of a company owns a share as a nominee or trustee for any other person or persons, or has concluded with any other person or persons a contract which controls the manner in which he will cast a vote attached to a share (other than the appointment of a proxy) he shall consult with and act in accordance with the wishes of such person or persons in respect of any act or omission by which he may become, continue or cease to be an exempt member.

(2) Where persons with whom the owner of a share is obliged by virtue of sub-paragraph (I) above to consult hold differing views about whether he should be an exempt member or not, he shall, unless a majority of such persons express their wish to the contrary, be an exempt member.

(3) The wishes of such person or persons shall be binding upon a member falling within the foregoing sub-paragraphs only after those wishes have been communicated to him in writing.

(4) Section 113(1)(2) of the Companies Act 1948 (Inspection of register and index) shall apply to such person or persons with the exception that no charge shall be made by the company for inspection of, or the sending of any copy of the register, or any part thereof, to such person or persons.

15.—(1) The following sub-paragraph shall be added to Section 19 of the Companies Act 1967 (Director's Report to include certain particulars of contributions for political or charitable purposes):—
(c) where the company has a political fund, the amount standing at the beginning and at the end of that year in the political fund.

(2) The following sub-paragraph shall be added to paragraph 2 of the Eighth Schedule to the Companies Act 1948:—
(e) Where the company has a political fund, the amount, if any, standing in that fund.

(3) The following paragraphs shall be added to the Eighth Schedule to the Companies Act 1948:

(a) "16(A) The balance sheet of a company which is a subsidiary of another body


corporate, whether or not it is itself a holding company, shall show the aggregate amount of the political funds, if any, of all bodies corporate of which it is a subsidiary or a fellow subsidiary (within the meaning of the preceding paragraph) together with the amount, if any, of its own political fund."
(b) "17(A) The consolidated accounts shall show the aggregated amount standing in the political funds, if any, of the holding company and of the subsidiaries, and the separate amount in the political fund, if any, of each of the companies."

16. The political objects to which this Schedule applies are:

(a) a donation or subscription to or other application of assets for the benefit of a political party of the United Kingdom or of any part thereof, or to or for the benefit of a person, who, to the knowledge of the company, is carrying on, or purposing to carry on, any activities which can, at the time the donation or subscription was given or the application made, reasonably be regarded as likely to affect public support for such a political party as aforesaid;
(b) the expenditure of money or application of assets

(i) on the payment of any expenses incurred either directly or indirectly by a candidate or prospective candidate for election to Parliament, or to any public office before, during or after the election in connection with this candidate or election; or
(ii) on the holding of any meeting or the distribution of any literature or documents in support of any such candidate or prospective candidate; or
(iii) on the maintenance of any person who is a member of Parliament or who holds a public office; or
(iv) in connection with the registration of electors or the selection of a candidate for Parliament or any public office; or
(v) on the holding of political meetings of any kind, or the distribution of political literature or political documents of any kind;
and the expression "public office" in this sub-paragraph means the office of member of any county, county borough, district or parish council or of any public body who have power to raise money, either directly or indirectly, by means of a rate.

17.—(1) In this Schedule "distribution", "divided" and "amount available for distribution" have the meaning ascribed to "distribution" in section 45(2) below, and related terms shall be construed accordingly.

(2) In this Schedule "assets" means any property, real or personal, of any character whatsoever, and wherever situated whether in Great Britain or otherwise.

18. It is hereby declared for the avoidance of doubt that no assets of a company shall be applied in furtherance of political objects

after the commencement of its winding up, notwithstanding any contract, agreement, arrangement or other transaction entered into by it or by any other person.'

Mr. Smith: The object of amendment No. 56 is to provide that, where a company makes donations or subscriptions of a political character, they should be made only out of a political fund, in broadly the same way as trade unions are restricted about the way in which they can make political contributions.
Amendments Nos. 57, 58 and 157 concern the method whereby the principle can be put into effect.
Amendment No. 56 does not seek to prevent companies from making political donations, just as there is no suggestion that trade unions should not make political donations. It seeks to introduce fairness and equity by applying the same principles to company donations as have for over 60 years been applied to donations and subscriptions by trade unions.
I believe that the only restriction in law that applies to limited companies is section 19 of the Companies Act 1967, under which companies are obliged to disclose political contributions in excess of £50. Many of my hon. Friends will know that since 1967 there have been revealing disclosures in annual reports.
Out of the 1,000 major companies in the country, about 350 regularly make political contributions. In the year to March 1979, which did not include a general election, they gave almost £2 million to the Conservative Party and associated organisations. It appears that about half the contributions go directly to the Conservative Party. The remainder go to such organisations as British United Industrialists, which is a curious body with the apparent object of collecting contributions from companies to pass on to the Conservative Party or associated causes.

Mr. Peter Archer: A front organisation.

Mr. Smith: As my right hon. and learned Friend says, it appears to be a front organisation, which gave up its corporate status after section 19 of the 1967 Act was passed so that it would not have to answer embarrassing questions as to what happened to the funds.
Other bodies occasionally receive contributions. In the past the Liberal Party has collected the odd crumb from the rich man's table. It is significant that there is no Liberal Member here today. The crumbs may not be big enough to be of interest to Liberal Members. However, we may recruit them to the side of fairness and equity. They appear not to be as much in favour with British companies as the Conservative Party and its associated causes.

Mr. Donald Anderson: Does my right hon. Friend find their absence surprising when surely this is one of the great Liberal themes—the liberty of the individual to do what he wants with his money?

Mr. Smith: That is a valid reason for the Liberal Party supporting our amendment. I also hope to appeal to whatever instincts of individual liberty remain among Conservative Members.
I do not know the total contribution from companies in the current year, but it will be significantly more. At the time of a general election the begging bowl is passed around more ostentatiously and effectively. The calculations that I have seen suggest that in excess of £2 million was contributed by British companies in 1979, and that most of it went to the Conservative Party. From time to time it is the ambition of Conservative Party treasurers to get much more from British companies through political contributions.
There is no limit to what companies can contribute. There is no limit on their assets or dividends. There is no control whatsoever. The shareholder who disagrees with a company's contributions has no rights in law. Under section 3 of the Trade Union Act 1913, as amended, a trade union member has a legal right not to contribute to the political fund out of which only political contributions can be made. There has been argument about contracting in and contracting out. Contracting out started in 1913, became contracting in in 1927 and contracting out again in 1946, since when neither political party has thought fit to change it. Whichever it is, members of trade unions have the legal right to decide whether they wish to contribute to the political fund. The Conservative Party is always running campaigns to suggest that trade union

members should have the right not to make political contributions, particularly those who do not share its political views, but is not prepared to offer that right to shareholders in British companies.
There is no legal restriction on political contributions. It is said in defence of that that those who do not agree with a company's decision to contribute to the Conservative Party do not need to buy shares, or can sell them and buy others.
It is an extraordinary argument that an individual is not able to hold shares in a company when he believes in its commercial prospects and approves of its policies in every other respect, apart from its political contribution.
As my hon. Friend the Member for Swansea, East (Mr. Anderson) reminded me, it would be an advance in individual liberty to construct the law so that a shareholder was not obliged to sell his shares to indicate disagreement with political contributions.
An important change is occurring in the structure of British companies. The influence of the private investor is greatly diminishing with the increase of institutional investors. A large amount of money invested in British industry now comes from pension funds. Contributions from people of all political persuasions go into pension funds and are subsequently invested in British industry, which is a distinctive feature of the present scene.
A lot of money invested in companies now comes from ordinary people of differing political persuasions who are deprived of the opportunity to choose whether that money goes to a particular party through political contributions. Money being invested through insurance premiums and pension contributions is an important change. The inactivity of the law might be less important if companies were still largely owned by private persons, although I do not believe that it would make much difference. However, the recent development is a dramatic and important change.
If the Government believe that trade unionists should dissociate themselves from the political fund, in all fairness they should recognise that shareholders who do not agree with the board's decision to support the Conservative Party should be given the same rights. Our amendments propose a method to


achieve equity. They suggest that a political fund should be established and only moneys from it should go towards political contributions.
I shall not bore the House with the details of the mechanism proposed. I believe that it is a workable scheme. More importantly, we should consider the underlying principles. Much the same rules should exist for companies as for trade unions. If the Government resist the principle, they will be seen to want one law for trade unions and their members and another for companies and their members. It will not have escaped the public's attention that the Conservative Party happens to be an important beneficiary from one and not from the other.
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The Conservative Party constantly campaigns for trade union members to contract out. Therefore, it must think that that is an important legal requirement of trade unions. We do not object to the right of trade union members to contract out—we have always accepted that as an aspect of individual liberty. We ask now that the same right be given to shareholders and to the vast body of indirect shareholders—people who invest and have their superannuation contributions invested in British industry through our institutions.
To disagree with these amendments or the principle that underlies them is an admission of an inequitable and one-sided situation in the law of this country. I believe that it is time it was changed. It is important that companies should be obliged to disclose their contributions—this has applied since 1967, and we have seen the extent to which political contributions have developed in that time. Now it is time to take the second step and bring political contributions under some form of legal regulation. This is not an attempt to stop companies making contributions to political parties. If they wish to make such contributions no doubt they will continue to do so in the same way as the trade unions have clearly committed themselves to supporting the Labour Party. I do not think that any accusation can be made that we are trying in any way to upset the balance between political parties' fund-raising efforts in this country, except to say that

so far the balance seems to be pretty heavily tilted in favour of the Conservatime Party.

Mr. John Page: I apologise for interrupting the right hon. Gentleman. I was absolutely fascinated by what he was saying. He said two things that astounded me. The first was that companies naturally supported the Conservative Party, although companies can make donations to any political party they wish. Secondly, he said something which has been disproved by a recent ruling in the courts about a constituent of mine. That ruling says that the political levy, or a portion of it, can be sent to any political party which is decided by the committee concerned. I hope that in the coming years many trade unions will wish to disaffiliate from the Labour Party.

Mr. Smith: Even though the hon. Member wandered into the House just as I was speaking, he had that look of intense expectancy on his face which prompted me to give way to him. I am glad I did.
First, I have not been arguing the case simply on the basis of companies contributing only to the Conservative Party. We know that they can make contributions to other parties. But almost uniquely they contribute to the Conservative Party. As I pointed out earlier, they used to give a few crumbs to the Liberal Party, but it appears that that is not currently fashionable. I think that the hon. Member knows as well as I do that, while it is legally possible for them to give contributions to any political party, on the whole they prefer the Conservative Party. My amendments would not fetter them in any way.
In the second part of his intervention, the hon. Member referred to the case of Parkin v. ASTMS, which was before the courts recently, and in which a judgment was given about political funds. I do not think that at the end of the day Mr. Parkin won that case, but by and large the hon. Member thinks that it is a good idea that trade union members should have the right under section 3 of the Trade Union Act 1913 not to participate in the political fund, although he might argue for contracting in rather than contracting out. All that I am saying is that shareholders should have the same rights


not to contribute to the political fund of a company and to be able to dissociate themselves from the decision to support the Conservative Party. If I have the logic of this wrong, perhaps the hon. Member will tell me why it is appropriate in one case and not in the other.

Mr. John Page: I should like to discuss this matter for an hour or so, but that would not be fair to the House. The right hon. Member made the point when he spoke of the voluntary nature of contributions. I was offended because he seemed to be saying that trade union funds must automatically go to the Labour Party.

Mr. Smith: The hon. Member must have misheard me, or perhaps I did not express myself very clearly. I do not think that I said that trade union funds automatically go to the Labour Party. It is an observable fact that the vast majority of trade union contributions go to the Labour Party, just as it is an observable fact that the vast majority of company contributions go to the Conservative Party. The point is that there are legal inhibitions on what the trade unions can do, but absolutely none, except disclosure, on what companies can do. The hon. Member has not made clear why what is sauce for the goose should not be sauce for the gander also.
That is at the heart of the amendment. It would be an equitable change in the law and an extension of individual liberty which the Conservative Party allegedly espouses. I have noted that when there is a clash between their financial interests and individual liberty the Conservatives' pursuit of individual liberty wobbles a little. Their attitude towards this branch of company law is a typical example of that. We argue this case in equity and fair dealing, and on that basis I commend the amendments to the House.

Mr. Leslie Spriggs: I shall follow my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) in his submission in favour of the amendment. I remember that, once before, there was a Companies Bill in Committee which I attended and this point also arose then. It was a matter of great interest.
I speak today as an active trade union member. I am a sponsored member of the National Union of Railwaymen and

am proud of it. There is a big difference between contributions being made by companies to the Conservative Party and other front organisations and contributions made by the trade union movement to the Labour Party and other labour organisations in this country. For example, my own trade union has regular branch meetings which are held every three weeks. Also there are regular district council meetings which are attended by delegates from branches all over the district. There is the national executive committee, and the district officers who are appointed on a permanent basis, and they are highly qualified people. There is a proper educational department on which large sums of money are spent to educate trade union members in carrying out their jobs as secretaries, chairmen, treasurers and auditors. Because of these regular meetings, the ordinary rank and file members of the trade union movement can express their opinions when it comes to a proposal to affiliate with the Labour Party or to make a contribution from the political fund. I emphasise that aspect.
When my right hon. Friend referred to contributions made by companies to the Conservative Party or its front organisations he obviously realised that the average shareholder does not have an interest to that extent in the way in which his funds are used by the board of directors. The first that any shareholder usually learns of any sum of money being passed by a company to a political party is when he receives the annual report, or, if he is able to attend the annual meeting, when he hears the report of what has happened to the money that should be shared between all those who have invested in the company.
I share my right hon. Friend's philosophy. He said that we are not against the support of the Conservative Party by those who believe that it should be supported. However, to be fair and honest to the shareholders in a company it is completely wrong—and at the worst dishonest—to use moneys that are intended for dispersal among those who have invested their money in a company for the support of the Conservative Party or other front organisations.
The trade union movement willingly pays a separate contribution to a specific


political fund for the purposes of furthering the interests of the Labour Party, the Parliamentary Labour Party and Labour councillors throughout the country. But it does so knowingly. Many meetings are held throughout the country at local branch and district council level. While the National Executive political subcommittee can, at any time, decide to make contributions to the Labour Party or any other political party, members have the right—and they use that right—to decide whether that money is enough, too much, or whether the contribution should not be made.
On the question of affiliation fees and the principle of affiliation to the Labour Party, the ordinary trade union workshop member—in my case the ordinary railwayman—has the right to decide, almost every month of the year, whether an affiliation should be considered by placing a motion before his branch. He can ask that any reference to a sum of money proposed as a contribution to the Labour Party should not be made. If that motion is moved and seconded, the chairmen of our branches—being experts in their jobs—would put that motion to the meeting. It would be debated, and a decision would be reached. In the 30 years that I have been active in the trade union and political movement, I have been present at many hundreds of meetings.
I must tell Conservative Members and the Government that it is wrong to allow companies to use shareholders' funds to support a political party. People who invest in companies do so in the belief that, if there are any profits, they will be divided and distributed according to the rules of the company.
Anyone who wishes to criticise the trade union movement will find that the deeper he delves into its rules the more he will understand that the trade union movement is 100 per cent. democratic. Its decisions are democratic in every way. When a motion is put before a branch, or through the national machinery, it is debated fully before any decision is reached. No one, at the end of the day, could say that moneys from the political fund have been used dishonestly.

Dr. Oonagh McDonald: When debating this issue earlier, during the Standing Committee which considered

the Companies Bill introduced by the Labour Government, I remember that the then Opposition spokesman—now the Minister for Trade—tried to minimise the question of political contributions made by companies. He told us—and it is an excuse that has been offered in other circumstances—that the political contributions to the Conservative Party from companies did not amount to very much. He said that they were a small proportion only of the funds of the Conservative Party—about 15 per cent. In a glowing report he told us of the Conservative Party associations up and down the country, consisting of 2,000 hard-working members apiece. No doubt they work their fingers to the bone holding jumble sales, wine and cheese parties, or whatever they do when trying to raise money to provide the bulk of the funds.
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His claim that the contributions from companies amounted to only 15 per cent. of the Conservative Party funds in any one year was, perhaps, a little misleading. On that occasion he omitted—I hope that he will not do so again—to refer to the various front organisations. My right hon. Friend the Member for Lanarkshire, North (Mr. Smith) has mentioned already, for example, the British United Industrialists.
I wish to quote from the Investors Chronicle of 25 August 1978, which states:
We pointed out on 5 August 1977 that BUI's Park Lane office is a poste restante for political money. Most is earmarked for Mrs. Thatcher".
The management of those funds is in the hands of a 15-man governing council, the membership of which stays completely anonymous. Other funds come from other front organisations, such as the Economic League. That is a mysterious organisation, and one that causes concern not only because it gives money to the Conservative Party, but because of its other activities which The Guardian has reported in the past, namely, supplying employers with information about their employees. It appears that that information is not always in accordance with the facts.
That strikes me as an extraordinary way to deal with the question of principle involved. Conservative Members


say "Yes, we receive money from companies but it is a small proportion only of our funds." In anybody's view, a sizeable amount of money is involved. The estimate for 1979 is about £2·5 million. As my right hon. Friend suggested, that might be a conservative estimate.
I find it a little astonishing that, since the Government were elected in May, companies have continued to contribute to the funds of the Conservative Party. Perhaps it is the largest companies only which contribute—those that have benefited most from the Conservative Party, such as the banks whose profits have been increasing at an amazing rate since the Tories took office.
Let us consider the other side of the story. Claims are often made that trade unionists, although they have theoretically and formally the right to opt out of their contribution to the political levy, are prevented from exercising that right. My hon. Friend the Member for St. Helens (Mr. Spriggs) helped us to understand the matter further by describing the conduct of branch meetings.
There are two more objective facts that should be taken into account. Very often the card that one has as a member of a trade union has two columns. One column takes the monthly or weekly contributions to the normal funds of the trade union and the other takes the political levy. I am a member of ASTMS and my card has two such distinct columns. The one labelled "political levy" is separate from the other and shows that one pays 10p per month.
It is thoughtful of Conservative Members to be so concerned for the liberties of members of trade unions who are obliged to fork out 10p a month when they do not really want to. It is delightful that they wish to protect the interests of trade unionists to such an extent. The point is that a trade union member cannot make a mistake about which part of his subscription goes to the trade union and which part goes towards the political levy, out of which he can opt.
My right hon. Friend the Member for Lanarkshire, North pointed out that the Conservative Party frequently campaigns among trade unionists to discourage them from paying the political levy. The campaigns have been remarkably unsuccessful, because about 190,000 trade

unionists opt out of paying the levy each year and that number has remained fairly static for the past few years.
Between 1976 and 1978 the number of complaints received by the certification officer from trade union members about the difficulties of opting out of paying the political levy totalled only 15. Only 15 people—compared with 190,000 who opt out each year—had any difficulty in obtaining the necessary forms from their branch secretary or in informing him that they did not wish to pay the political levy. It is important that that should be clearly on the record.
During the term of the previous Government and, no doubt in Committee on the Bill, we have heard Conservative Members say that it is difficult for trade unionists to avoid paying the political levy. That is simply not true. In most trade unions, certainly in my own, the political levy and its labelling on the contribution card is made clear. The fact that so few complaints have been scraped together makes that point.

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order, I am sorry to interrupt the hon. Lady, but the amendment does not relate to the trade union levy. I take it that she is drawing attention to the levy in relation to the amendment, but she ought to concentrate on companies and not trade unions.

Dr. McDonald: I wanted to move on to the second part of my argument by making a parallel between the political levy of trade unions and the contributions of companies to political parties. We consider that that parallel should be made clear and it was therefore necessary for me to draw attention to the fact that trade unionists do not have to pay the political levy and that the ways in which they can opt out are always made clear to them. There do not appear to have been any difficulties in the operation of that system for more than 60 years.
I turn to the question of principle. The proportion of money that goes to the Conservative Party from companies—whether 15 per cent. as the Minister for Trade once estimated, or much more, because of the contributions from front organisations or informal contributions made at business lunches and such events —is not the point at issue. I am concerned not with the amount of money, but


with the question of principle. Whether a shareholder gives lop or £10 a year to the Conservative Party is not the point. The point is that he should be at liberty to opt out of that payment, as is a trade unionist. The trade unionist is free to use effectively the mechanism provided for opting out.
The amendment was discussed in Committee and falls at an entirely appropriate place within the Bill, since we are dealing with the part that concerns the distribution of profits. Shareholders should have the right to say that they want the whole of their share of the profits given to them without any deduction or contribution to any political party, whether the Conservative Party or any other. They should have the freedom to exercise that choice.
In opposition, the present Minister produced no arguments against the parallel principle applying to shareholders. He went all round the subject and talked about where the parties got their funds and how much was involved, but none of those things are to the point. The issue is a matter of principle. It is a question of individual liberty.

The Minister for Trade (Mr. Cecil Parkinson): I hope to demonstrate that the political fund system works in a scandalous fashion. It is in no way to be admired and if a major reform is needed it is probably the reform of the working of trade unions' political funds.

Mr. Bob Cryer: Totally untrue. The Minister cannot justify that.

Dr. McDonald: In view of what I said earlier about the number of complaints, I think that the Minister will find it hard to make his case. It seems that he wants, at all costs, to avoid the question of principle, which is the liberty of the individual to decide whether he or she wishes to contribute to a political party. That issue has been settled for trade unionists, but it has never been settled for shareholders.
The Minister will obviously try to avoid facing up to the issue of principle. He has no defence against our arguments except to try to throw dust in everybody's eyes by making false accusations about the political funds of trade unions. I doubt whether he will be able to produce evidence to support his case.
We want to hear a reply to the question of principle. Why does the Minister not wish to defend the liberties of shareholders? Why is he concerned only about the liberties of trade unionists? When will he face up to the question? He never did so when he was an Opposition spokesman. Now that he is a Minister let him tell us why he is not prepared to defend the liberties of individual shareholders.

Mr. Ernie Roberts: The law permits companies to spend money on political campaigns and to finance a political party out of their profits or assets.
No shareholder has the right to contract out even when he disagrees violently with the political party or the organisations concerned. I concur with my hon. Friends who have described what happens in the other part of industry, the trade union movement. It is necessary to make the comparison with what happens in the trade union world—the Minister nods assent—and what happens in companies.
5.30 pm
As I said in Standing Committee, I was a national trade union leader for 20 years. I was responsible for looking after the political funds of about 900,000 members who had agreed to pay the political levy into the union's political fund. That money was kept separate from the general funds of the union. Incidentally, for the information of the Minister—I am sure he does not know—this fund is controlled by the district committees throughout the length and breadth of Britain consisting of those members and on behalf of those members who contribute to the political fund. No one else is involved. The fund is under the direct control of those within the districts who make the contributions and decide how the money shall be spent. They are compelled to do this by the 1930 law to which reference has been made.
Members have the right to contract out from paying the political levy to the Labour Party. In my union, with 1 million members, about 300,000 exercise that right and contract out of paying a political levy. As the officer responsible for looking after the political funds and answerable to the membership, I received only three or four complaints a year, out


of a total membership of 1¼ million, by members saying that they were not allowed to contract out or were being compelled to pay the political levy when they did not wish to do so. Those cases were easily and soon ironed out when they were brought to my attention on behalf of the union.

Mr. Anthony Nelson: I bet they were.

Mr. Roberts: The union concerned is the Amalgamated Union of Engineering Workers. If the hon. Gentleman were to bring a complaint, he would find that the principle I have outlined works.
I understand that about 200,000 new members and some of the older members of the trade union movement actually contract out. That is out of a total figure of almost 12 million members belonging to unions who pay the political levy. Of these, 6½ million are satisfied to pay the political levy to the Labour Party. When the levy is paid, those workers are made members of the Labour Party. They are, therefore, acting openly and deliberately. They know what the levy entails. They know that it makes them a member of a political party that they want to join.
The Opposition are saying that shareholders should have the opportunity to contract out of paying to a political party with which they disagree. Workers are not told that if they do not pay the political levy they will have to get out of the union. That has never been said to any member of my union, the AUEW. If they do not wish to pay the political levy, they do not pay. The payment of the contribution and the administration of funds are covered by the rules of the trade union movement that have to be registered with the registrar.
The rules of the union and the decisions of union members make clear how the funds shall be looked after. Why should not the shareholder in a company have the right to say that he does not like the Tory Party? Many, I am sure, do not like that party, especially the treatment they are receiving through the Government's economic policies.

Mr. Douglas Hogg: Does the hon. Gentleman accept that there is a difference between being a shareholder in a company and being a member of a

trade union? A shareholder can always sell his shares and opt out of the company. A trade union member who seeks to withdraw from the union may lose his job.

Mr. Roberts: The logic of the hon. Gentleman's suggestion is that a worker who does not like contributing to the political fund of a union should leave his job, get out, and find himself another job. That is palpably absurd. Unions do not operate on that sort of basis. The shareholder should have the right to say that he wishes to keep his investments within a company but that political parties or organisations with which tic, disagrees should have no share of them.
The company should be compelled to set up a separate political fund. Why not? What are companies afraid of? If there is so much support for the Tory Party or the organisations to which they make subscriptions, why are those companies afraid of setting up a fund at the will of shareholders belonging to the company? These shareholders would be making contributions freely instead of being compelled to make them by a body of directors which then takes a decision to pass the money on to the political party of its choice. Not only profits can be used. Assets of a company can be used, and are used, on occasion, to finance the objectives of the Tory Party and other organisations that I will mention.
I find that in 1978, 378 companies gave £1,400,000 to the Tory party, the Economic League and other associated bodies. The Economic League is an anti-trade union organisation. That is why the money is contributed. It has listed about 35 companies which each year contributed over £1,000 each to that organisation. Eight of these companies are among the top 50 companies in the United Kingdom.
The list includes all the top clearing banks. One can understand that. They are doing very nicely. Of the joint stock banks, Lloyds increased its profit by £270 million this year, while the Midland Bank had an increase of 40 per cent. in profit. Between them, the joint stock banks will declare profits more than £1,000 million higher this year than last year. They can afford to give, as they do give, some financial contribution to their representatives in this place.
Of the top 16 insurance companies, six make contributions to the Economic League. There are other anti-working class, anti-Labour and anti-trade union organisations to which companies make donations.

Mr. Spriggs: My hon. Friend should not forget Aims of Industry.

Mr. Roberts: I should mention Aims of Industry, particularly, as my hon. Friend reminds me.
There have also been a number of campaigns. Some important political campaigns conducted by big business are anti-Labour in content. Hon. Members will recall Mr. Cube, the campaign of the sugar industry and the money it spent for political purposes. They will also recall the campaign against the nationalisation of the building industry and the money that was spent. There have been a number of such campaigns, conducted by big business using the funds of the shareholders, for a political campaign against another political party, in this case the Labour Party.

Mr. Anderson: Does my hon. Friend accept that, given the poor return on their investment because of the body blows to the construction industry by the Conservative Party, some members of the Campaign Against Building Industry Nationalisation will be asking for their money back?

Mr. Roberts: I am sure they will, particularly the building trade workers, of whom about 250,000 are unemployed as a result.
It is not a small sum of money that we are talking about. When the facts are disclosed, it is estimated that about £2½ million will prove to have been given in 1979 in political donations to the Tory Party and other organisations. Also, companies do not have just a small political fund. The unions' political funds amount to £4 million. That sounds a great deal, but we should remember that companies can in theory use all their assets and profits—many hundreds of millions of pounds—in this way.
Companies should be compelled to give shareholders the democratic right to decide whether their money shall be used for political purposes and, if so, for which

purposes. Many of them may decide, because of their disenchantment with this Government's efforts to solve their economic problems, to transfer some of their political funds to the Labour Party. Individuals should be permitted to decide whether their assets should be used for political purposes.

Mr. Cryer: I should have thought that the Government would support the amendments overwhelmingly, since they are always talking about ballots—for strike action or the election of officers—when it comes to trade unions. They are even legislating on those lines. The present Employment Bill provides several million pounds for this purpose. If they are so concerned about balloting in the unions, why not accept these modest amendments, which would enable people to influence the way in which their companies make donations to political organisations?
The Tories also say that nationalisation of the insurance companies and pension funds is unnecessary because the public already own them. The man from the Pru or the Pearl collects the subscriptions of 25p, they are invested in those companies and democracy is the result. If that is so, why should not those who contribute to this "democracy" have a voice in deciding how those funds are used? I am merely going by what the Tories say. We know that it is nonsense that people who contribute to pension funds and pay into insurance companies have no say in how the funds are used, but the Conservatives must not expect us to ignore the arguments that they use in other respects.
5.45 pm
We should all be alarmed that the Government have two standards—one for the unions, on which they are lavishing £2 million or £3 million of public money for ballots. They are closing nursery schools and cutting meals on wheels services but they are so obsessed with improving balloting practices in the unions that they are providing money for it.
The companies which make political donations may not use the money in the interests of the shareholders—who include pensioners and local authorities. Labour-controlled authorities may invest in companies which are spending money


without their authorisation on the Tory Party and its associated front organisations.
In the year ending 1978, the Tory Party received from big business just under £1 million. I was at a splendid rally at Rotherham recently, attended by 7,500 people protesting at the Government's inaction on the steel issue. The best slogan I saw was:
Preserve Wild Life: Pickle Keith Joseph".
It was the right hon. Member for Leeds, North-East (Sir K. Joseph) who, with the Prime Minister, set up the Centre for Policy Studies, which received £28,250 from British companies. British United Industrialists received £603,000; the Economic League received £128,000; Aims of Industry received £25,000; various other minor organisations received £38,000. That is a total for that year of almost £2 million. I cannot believe that the Minister of State will simply accept that all the shareholders all the time believe that £2 million should be spent in that way by these major companies.
Let us take a closer look at some of the companies that have spent this money. Taylor "We built Ronan Point" Woodrow is continually advertising the virtues of free enterprise. It contributed more than any other company to all these organisations—the significant sum of £67,000. It might have been more useful if the company had spent that money on compensating the local authority whose flats it built with such disastrous results and contributed towards the £34 million that local authorities had to spend on strengthening blocks of flats of the same design.
Allied Breweries contributed. The brewers have received dividends since in the return of a Tory Government. Ranks Hovis McDougall provided £46,000. Among the donors to the Conservative Party itself, Taylor Woodrow gave £34,050, Ranks Hovis McDougall gave £30,000, the Rank Organisation £30,000, and so on.

Mr. Anderson: I hope that my hon. Friend will not omit Consolidated Gold Felds Ltd., a company that we on this side sought to protect as best we could, with no help from the Conservative Party—yet the latter received £25,000 from that company last year.

Mr. Cryer: My information was that the company contributed £20,000 but no doubt my hon. Friend is right and inflation increased the sum. Victor "Fingers" Matthwes, who produces the "Pravda" of the Conservative Party at Trafalgar House, donated £20,000 in the year ending 30 September 1978. I wonder whether all the shareholders at Trafalgar House agreed with that.
Significant sums are involved in the lists which I have before me. The lists are obviously curtailed, but the contributions contained therein range from £20,000 upwards. It is not surprising that Thorn Electrical Industries paid £20,000 to the Conservative Party. The Minister of State and the Secretary of State stand firmly at the Dispatch Box rejecting import controls, yet in 1978 Thorn closed the biggest television assembly factory in Europe in order to take imports from Korea and West Germany. That company has received some repayment for its handsome donation. I do not say that the payment was direct, but it illustrates Conservative policy in action.
We are discussing payments by companies to the Conservative Party and to Conservative Party front organisations such as the Centre for Policy Studies and the Economic League. The Economic League makes the most invidious and savage attacks on industrial relations through the blacklist service that it provides to subscribers. Evidence about employee vetting through the Economic League came, to light in 1974 at Strachans Hampshire factory, at the British Steel subsidiary reinforcement steel services at Greenwich in 1977 and at the Great Southern Cemetery and Crematorium in 1978. That blacklisting organisation is disgraceful. I am sure that even Conservative shareholders would hesitate to support a spying organisation which breeds such bad industrial relations.

Mr. Ernie Roberts: Has my hon. Friend noticed that he is speaking to the converted, since those who should be listening are absent from the Government Benches and will not get the message?

Mr. Cryer: Perhaps I am predictable. I do not mind that because I am fighting for justice. Over the years many people


have fought for justice and, when that is expected of one, it is praise rather than criticism. I was sent to the House to talk about justice and about the right of shareholders to have a say in the way in which significant sums are spent. I was certainly not sent here to keep quiet, and my record acquits me of any such charge.
We should give shareholders the power to exercise supervision. We are asking for nothing more than an element of accountability so that shareholders, many of whom are Conservatives, can at least say "Just a moment, we should discuss this matter and take a vote upon it". Shareholders cannot do that at present.
Some shareholders will be horrified at what we propose. Many local authorities will not wish to contribute to the Conservative Party or its front organisations, such as Aims of Industry, but others will wish to contribute. Conservative Members are always talking about the freedom of choice—the right to choose whether to make a contribution to a particular organisation.
I predict that the Minister of State will reply by attacking the trade unions, although trade union political funds are governed by legislation. Trade unionists have the right to opt out of making a contribution. Shareholders do not have that right. Our proposal is a step in the direction of accountability. However, the Minister will repeat his usual platitudes. The move towards more accountability is irreversible. As the Conservative Government's economic policies put the country deeper and deeper into economic morass a Labour Government will be returned. The Minister of State may be a U-turner, like so many of his colleagues. If the Conservative Government do not agree to such reforms, we shall. The Conservative Party's claim that it is not the party of reaction and that it recognises needs for reform will go by the board.
The Conservatives have a reputation for being deeply reactionary, deeply dogmatic and opposed to any reform. I expect the Minister to oppose the reforms which we suggest, but he will be spitting against the wind. The more the Conservative Government belie the need for reform, the sooner we shall have a Labour Government who will introduce such accountability.

Mr. Anderson: My hon. Friend the Member for Keighley (Mr. Cryer) made a remarkable speech. He proved his ability as an investigative journalist. Perhaps the editor of the the Conservative Party "Pravda" will try to recruit him
Our suggestion is modest. It is suggested that each company above a certain size should have a political fund and that shareholders should be allowed to opt out if they disagree with the political objects to which the fund is devoted. The Minister has given us his advance reaction to our modest proposal and it bodes ill for the tone of the debate. It is not surprising that there are Benches of emptiness around him and that he sits in such godlike isolation. Perhaps his hon. Friends wish in no wise to be linked with his reaction. He has said that he intends to attack the way in which trade union political funds are disbursed.
My hon. Friend the Member for St. Helens (Mr. Spriggs) talked of the model of democracy in the National Union of Railwaymen. I declare an interest in that I am a member of that union. My hon. Friends the Members for Thurrock (Dr. McDonald) and for Hackney, North and Stoke Newington (Mr. Roberts) said that there were few complaints to the certification officer or to the leaders of the trade unions about the way in which political funds are operated.
Let us suppose—although it is difficult to do so—that there are faults in the way in which the political funds of trade unions are operated. Even if that were so, it does not attack the point of principle that we make. If there are faults, let them be dealt with in the proper way. But we should at least put members of companies on the same basis as members of trade unions. That is essentially fair and just. A basis of parity should be established. Any shareholding member of a company should have the same opportunity to contract out as a member of a trade union.
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I hope that the Minister will not engage in a self-indulgent attack on the political fund, perhaps fortified with a brief—I trust not from the Civil Service; no doubt it will be from Conservative Central Office—giving him facts of alleged injustices within the political fund. Let the Minister face the point of principle and


tell us why members of companies should not be put on the same footing as ordinary members of trade unions. Trade unions have nothing to hide. Everything is above board, as my hon. Friends have said. We only wish to see the same principles apply to members of companies.

Mr. Parkinson: Does the hon. Member agree—as he is trying to equate two things which in my view are not capable of being equated—that Parliament should legislate about every aspect of how a trade union should organise its affairs, that we should have a table A and exactly the same regulations for trade unions? Is that what the hon. Gentleman is arguing? We are constantly told by his right hon. and hon. Friends that we must keep the law out of trade unionism. The two matters are different. The hon. Gentleman should be careful what he is arguing about.

Mr. Anderson: The Minister is trying to put words into my mouth. I have never suggested that companies and trade unions should be put on all fours in terms of legislation. All I am asking—and this demands an answer—is: why do trade union members at present have greater freedom than members of a company in respect of contributions to political funds? As my hon. Friend the Member for Hackney, North and Stoke Newington said, trade unionists have an opportunity to choose whether to contribute to the political fund. Even in a highly politicised union such as the Amalgamated Union of Engineering Workers a significant portion of the membership exercises that right; that union being a democratic organisation the membership has every right to do so. As trade unionists have that freedom, why should it be denied to ordinary members of a company?
The reason why I am disappointed in the early warning of a negative response from the Minister is that in Committee he was so often reasonable. He sought—

Mr. Spriggs: In his effort to answer the Minister in a proper manner, my hon. Friend is trying to make a point about what trade unions do and relating it to company law. Trade unions have their own rules. An annual conference is held at which the rules are revised.

Those rules, when agreed, are submitted to the Registrar of Friendly Societies and, if they are within the law, they are registered as rules. In general, the trade unions guard those rules jealously and it is the duty of chief officers of the trade union movement to guard those rules against misuse by anyone.

Mr. Anderson: As always, my hon. Friend the Member for St. Helens has made a valuable point. I was paying a tribute to the Minister. I was saying how, in Committee, he was so genial, reasonable and willing to try to answer the points that we put forward. By and large, from the party political point of view, it was a non-controversial Committee. As so often happens when debating companies Bills it is the Back Benchers on both sides who contribute. One thinks of the distinguished contributions made by the right hon. Member for Crosby (Sir G. Page) and the hon. Member for Kensington (Sir B. Rhys Williams). We have been able, cross-party, on a Back-Bench basis, to make reasonable points that have often been opposed by the Government, of whichever party.
In the early part of last year, on the basis of Back Benchers versus the Executive, the Executive had begun to take this point on board. I was heartened when I saw the reaction of the Executive, in the words of my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) as reported in the Official Report of the proceedings of the Committee. He had this to say in relation to a similar proposal to establish a political fund:
whereas the Government find wholly laudable, and have considerable sympathy with, the objectives behind the amendments of my hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo) which seek to achieve parity of treatment in respect of political contributions between shareholders in a company and members of a trade union, there are a number of considerable technical difficulties in the way of applying directly to companies provisions which were drafted specifically within the context of trade union law".
So at least a point of principle had been achieved. The Executive was accepting, on a basis of fairness, that if it were possible we should surmount the technical hurdles and seek to approximate company law with the position of trade unions in respect of contributions for political purposes. Following this major


step by the Executive—an acceptance in principle that something should be done—we have sought to meet some of those technical points in this amendment.
My hon. Friend the Member for Caithness and Sutherland also said in Committee that:
A company's shares may be transferred. If shares are sold,"—
he posed the question—
does the new shareholder have to choose again whether to contract out or will the share continue to be contracted out automatically?"—[Official Report, Standing Committee F, 20 February 1979; c. 679–80.]
In our refined, amended version of that same proposal we have sought to deal with that point and shares will remain contracted out unless and until the purchaser of those shares decides otherwise.
If, as I hope, the Executive still has sympathy with the objectives, perhaps the Minister will help us over any technical difficulties that remain. Otherwise we can only conclude that when, as has been said, there is a conflict between a point of principle—that point of parity, justice and fairness—and the self-interest of the Conservative Party, it is the latter that will prevail. That must necessarily be our conclusion if this point is not met.
It is no answer to suggest, as did the hon. Member for Grantham (Mr. Hogg) that any individual member of a company can sell his shares. Why should he sell his shares if he does not want to? The shares may be at a market low. The duty of the trustees of a trade union pension fund is to maximise the return tor the members of that fund. They may find that they can best do that by investing in a company which happens to make political contributions. Why should an ordinary rank and file member of a trade union who contributes to his pension fund make an indirect contribution to a political party of whose aims he may disapprove? fhat would be quite wrong in principle. A similar point was made in respect of insurance companies, and pension funds in general, by my hon. Friend the Member for Hackney, North and Stoke Newington.
On the point about freedom, I feel somewhat revolted with myself if I walk into Marks and Spencer rather than the Co-op to purchase goods, or if I buy a

pint of beer brewed by Allied Breweries, because I realise that by so doing I am contributing to Conservative Party funds. However, as a modest individual I do not suggest that I should be able to opt out in any purchases I make—

Mr. Douglas Hogg: It is always open to the hon. Member, if he is so appalled by the prospect he has described, not to go into that shop or to buy that pint of beer.

Mr. Anderson: Yes, and it is on that basis that I do not carry my proposals so far as to suggest that if I have such unwisdom as to go into that shop or public house I should in some way be entitled to a reimbursement for the portion of my outlay that goes to the Conservative Party.

Mr. Cryer: Does my hon. Friend accept that while there may be some element of choice in the retail trade, the people who live in Ronan Point, for example, which was built by Taylor Woodrow at ratepayers' and taxpayers' expense, have no alternative but to contribute to Taylor Woodrow, because when the contract is awarded that company occupies a monopoly position?

Mr. Anderson: That is precisely the point. I may have a choice as to whether I go into Marks and Spencer or buy a pint of Allied Breweries beer, but the shareholder and the unfortunate resident of Ronan Point have no such choice. That is the essence of our case. It is a matter of freedom, and it is sad that the party of freedom is not strongly represented here. It is a question of principle and of individual rights. We say that it is wrong that a member of a trade union should have greater freedom in this respect than that enjoyed by shareholders.
I noticed that in replying on the question of political funds in Committee on the previous Companies Bill, the hon. Member who is now the Minister said
I am not arguing, on the basis of narrow self-interest, that this is a major aspect of our party's financing and that a change would damage us irrevocably. It would not. We are very much more broadly based in our source of finances than hon. Members opposite wish to believe."—[Official Report, Standing Committee F, 15 February 1979; c. 650.]
I had not intended to descend to that sort of argument. The Minister said elsewhere that contributions from companies amounted to only 15 per cent. of total


Conservative funds. Yet in 1979—the election year—the Minister said that his party received between £2 million and £2·5 million under that head, and if that represented 15 per cent. of the total, the party must have received £15 to £16 million in all. We do not argue the issue on that basis, however. If the Conservative Party were to become hard up, and if it were considered proper for democratic purposes that it should have another source of finance, perhaps the Exchequer should consider the matter.
We do not argue the matter on that basis. We say only that there is currently an imbalance and an inconsistency in our law and that, as a non-party, non-controversial measure, the amendment should be accepted and a political fund established out of which shareholders could opt if they so wished.

Mr. Parkinson: I apologise to Labour Members for having been slightly tetchy from time to time during their speeches. I think that battle fatigue is setting in. Twenty-seven sittings on the last Companies Bill in Committee, and 20 or so this time, coupled with several days on Report have finally affected me. I hope, however, that in the course of my remarks I shall be able to deal with the points raised in the debate.
I do not speak as one who wishes to pour scorn on the trade union movement, or attack it. I do not believe that the way in which we fund our political parties currently is satisfactory. There is reason for re-examining that. However, I argue that, until that is done on a broad basis, it would be wrong to make a piecemeal change such as that proposed tonight. It is piecemeal. It is saying effectively that we should make an attack on one party's source of funds, without changing any of the rules, however unsatisfactory they may be, which apply to those of the others.
I should therefore like to set the argument in perspective. First, I shall put into perspective the importance of industrial contributions as a source of funds to my party. Including all the other organisations which so excite Labour Members our finance from industry and from donations amounts to between 15 and 20 per cent. of the party's total income. It

is not easy to put an exact figure on the contributions because it involves adding up the income of each of the 630 or so independent Conservative associations which exist in all the constituencies. Our inability to produce a total sum is a sign of our strength, because no other party can match that commitment in one constituency after another.
The Houghton researches into party finance showed quite clearly that the Conservative Party is by far the most broadly-based in the country. The average membership of a constituency Labour party is 500. In a good year the Liberals can muster 300. Spread throughout the country each association in the Conservative Party can claim an average of 2,400 members.

Mr. Clinton Davis: Not in Hackney, Central.

Mr. Parkinson: Perhaps not, but in Hertfordshire, South—my constituency—we have 8,000 members which more than makes up for the smaller number of very dedicated members in Hackney, Central.

Mr. Clinton Davis: Is the Minister aware that in the local elections that will eventually come upon us it is doubtful whether as many as 2,000 people will actually vote Conservative in Hackney, Central?

Mr. Ernie Roberts: Will the Minister answer a further question?

Mr. Parkinson: I would rather answer the hon. Member for Hackney, Central (Mr. Davis), and I hope that he will not mistake that for any kind of personal popularity on his part. I can only say that there are misguided people in all corners of the land. I even have some in my constituency who vote Labour and, even more strange, some who vote Liberal.
I want to make quite clear that our party has a huge number of members among the general public who decide of their own accord to subscribe to our funds. My association raises money in substantial sums, and we contribute money to the centre. Some of those sums are included in the donations.

Dr. McDonald: I am a little puzzled by the Minister's remarks, since he seems to be making two contradictory claims. He


says that he knows for sure that the contributions from companies and from the other organisations amount to about 15 or 20 per cent. of total funds, but he also maintains that he does not know what the total of Conservative Party funds is. He says with great pride that Conservative Party associations throughout the country work extremely hard and make great achievements in the amount of funds that they produce. If they do that and it is a source of such pride to him, why does he not encourage his party to discover the nature and extent of the achievement so that he could further encourage his party activists by being able to show how much Hertfordshire, South produces as opposed, say, to the amount raised by the Hackney, Central Conservative association?

Mr. Parkinson: In fact, we provide that information because, unlike the hon. Lady's party, we are not a centrally directed organisation. Our Conservative associations are independent associations of Conservatives who choose of their own accord whether to join the National Union. We do not believe in the centrally directed, highly regimented type of organisation which is essential in the Labour Party if Members such as the right hon. Member for Bristol, South-East (Mr. Benn), the hon. Member for Liverpool, Walton (Mr. Heffer) and the hon. Lady herself are ever to have any power in the party of which they are members.

Mr. Archer: rose—

Mr. Parkinson: May I just carry on? I wish to point out that the 15 per cent. to 20 per cent. to which I have referred is to be compared with the 90 per cent. which is the contribution made by the trade union movement to the funds of the Labour Party.

Mr. Cryer: In fact, the contribution of the trade union movement is much nearer 50 per cent. of the total expenditure. The Minister should understand that we have about 630 constituency parties raising funds for local elections and for running the party. As a democratic party, we do not maintain centralised accounts for each individual constituency party, so I cannot give the exactly accurate proportion of expenditure coming from the trade union movement, but the Minister can

take it from me that it is about 50 per cent.

Mr. Parkinson: The hon. Gentleman has confirmed that the proportion of the Labour Party's funds coming from the trade unions is far in excess of any proportion which industry contributes to my own party.

Mr. Archer: Indirectly and directly?

Mr. Parkinson: Yes, indirectly and directly. The arguments today have followed very much the arguments advanced in another place by Lord Wedderburn. The word "equity" is often bandied about by Labour spokesmen on these occasions. The great search for equity and justice is supposed to be motivating them, and the fact that they are attacking a source of income of a political rival never crosses their minds. It is always the great search for justice and equity.
Let us therefore consider how equitable and just are the arrangements for the political funds of the trade union movement. If there be something admirable which should be emulated, let us see what it is. First, I remind the House of the 1913 Act and the fact that members of trade unions could have a ballot about which party they would pay their funds to. There has not been a ballot since before the 1913 Act. In fact, there has not been a ballot since 1908. So there is one great democratic right which the trade union movement did not use.
Let hon. Members read "The Fifth Estate" by Robert Taylor. [An HON. MEMBER: "What is the relevance of this?"] There is an important point here, and I wish to emphasise it. If everything said and repeated today had not been said in the Chamber over the past three days, we could have finished about two and a half days ago. Let us look at what happened when the law changed so that the onus was moved from contracting out to contracting in. There was a huge and dramatic fall in the number of members contributing. The moment that members had to do something to join or to pay the levy, nobody bothered, or very few bothered. [HON. MEMBERS: "Oh."] Yes, that was an overstatement, but there was a huge fall in the numbers. When the law was reversed, there was an increase. Plainly, therefore, there is a substantial


apathy vote or apathy element in the political contribution of trade unionists.
We know full well that the hon. Members for Hackney, North and Stoke Newington (Mr. Roberts), for Thurrock (Dr. McDonald), for St. Helens (Mr. Spriggs) and for Keighley (Mr. Cryer) are trade union enthusiasts. They are here, every one of them, sponsored by their trade union. Their enthusiasm is obvious from what they have said. They are—it is no criticism—passionately devoted to the trade union movement.

Dr. McDonald: I am a member of ASTMS, but I am not sponsored by that union. The Minister should check his facts before bandying these arguments about.

Mr. Parkinson: Then that is another thing which the hon. Lady does not have in common with her hon. Friends.

Mr. Cryer: rose—

Mr. Parkinson: No. I shall give way in a moment. Let me put it in this way. Whether sponsored or not, they are members of trade unions and committed—this came through in every word that they said—to the notion that the trade union movement is a bastion of democracy. They believe in it passionately. The point does not depend on sponsorship. They passionately believe in the trade union movement.
If I may say so, the hon. Member for St. Helens made an excellent speech and, as usual, his sincerity on this matter shone through. But that commitment to the trade union movement is not shared by tens of thousands, or probably hundreds of thousands, of people who are members of trade unions. People have to join because of the closed shop, or they are trade union members because they just find it easier if they are. More and more have to be members now. They certainly do not have the great commitment to the movement shown by the enthusiasts and activists such as those hon. Members who have spoken today.

Mr. Tristan Garel-Jones: rose—

Mr. Parkinson: I should like to continue my argument, if my hon. Friend does not mind. I wish to underline the point. Detailed research was done by

Mr. Michael Moran in 1975 into some groups of Post Office workers. Some interesting statistics emerged. First, 95 per cent. of the sample paid the levy, but only 51 per cent. realised that they did, and only 21 per cent. thought that that their union should be affiliated to the Labour Party. Therefore, 44 per cent. did not realise that they were paying and 30 per cent. of those who paid did not think that they should pay to the Labour Party.

Mr. Garel-Jones: May I take up the point made by the hon. Member for Thurrock (Dr. McDonald)? As a member of her trade union—we are brother and sister in this matter—I wish to underline the point that my hon. Friend has made. I was delighted to hear that the hon. Lady is not a sponsored Member, and that may well be due to the fact that 80 per cent. of the members of our union have already opted out of the political levy.

Mr. Parkinson: A very sensible decision that was, too. I refer now to another example which I gave in Committee and which I wish to repeat because of its interest in this context. In Vauxhall Motors, in four out of five occupational groups interviewed, as many as 70 per cent. paid the levy, although between a third and a half did not realise that they did so.

Mr. Anderson: rose—

Mr. Parkinson: I shall not give way for the moment.

Mr. Anderson: Why not?

Mr. Parkinson: Because I want to make my speech—which is a very good reason. But worse than that—

Mr. Cryer: On a point of order, Mr. Speaker. The Minister did not give way, and I must clarify the position because I am particularly sensitive about declaring financial interests—

Mr. Speaker: Order. I shall give the hon. Gentleman an opportunity, but he cannot seek to clarify that on a point of order. The Minister promised to give way, but he did not say when, though I gather that "when" will come.

Mr. Cryer: I have to raise it as a point of order, Mr. Speaker.

Mr. Speaker: Very well.

Mr. Cryer: As you know, Mr. Speaker, by a resolution of the House, Members have to declare a financial interest. The Minister said that I was sponsored. I did not declare a financial interest because I am not a Member sponsored by a trade union, although I am a members of the T & GWU. I wish to make clear on a point of order, since the Minister denied me the opportunity, that I am not a sponsored Member and that therefore, in making no declaration, I was not contravening the resolution of the House.

Mr. Speaker: I am much obliged.

Mr. Parkinson: We all know that if there were a degree for barrack-room lawyers, the hon. Gentleman would have graduated with starred first-class honours. There was no question of his getting tripped up on a minor procedural point of that kind.
I was about to say that matters are worse than the facts which I have so far given—the fact that tens of thousands, or probably hundreds of thousands, of people paying the levy are not aware that they do, that many of those who do 90 pay actually do not support the Labour Party, and, at the TUC congress last year a speaker admitted that a majority of trade unionists who voted at the last election voted Conservative.
But even on the basis of all that, armed with these votes, based on unwitting contributions by people who do not wish to subscribe to the party, and many of whom are not aware that they do, trade unions go to the annual conference of the Labour Party and control it. It is through the power given to them by tens of thousands of people who do not even support the party that the future policy of the Labour Party is dictated. It is on the basis of those spurious contributions that people such as the right hon. Member for Bristol, South-East plan to take over the Labour Party.

Mr. Ernie Roberts: The Minister said that he would give way, and he has done so eventually. He obviously does not know that a person who pays a political levy becomes a member of the Labour Party and is represented as a member within the Labour Party. There are

2,500 branches of my union where the political levy-paying members are affiliated to the local Labour Party. They are represented there, and as members they play their part.

Mr. Parkinson: I do not wish to repeat myself, but the hon. Gentleman has obviously missed my point. When detailed research was carried out, of 95 per cent. of those interviewed who subscribed to trade unions, only 51 per cent. knew that they paid a political levy. Of that 51 per cent., only 21 per cent. thought that they should support the Labour Party. Yet the hon. Gentleman is arguing that, because people forget to contract out, or do not contract out, they become ardent devotees of the Labour Party. But we know that more than half of all trade unionists who voted at the general election voted Conservative. However, according to the hon. Gentleman, they are paid up members of the Labour Party.

Mr. Anderson: Will the hon. Gentleman give way?

Mr. Parkinson: I must get on, and I think that I have given way sufficiently.
I turn now from this democratically run, much-to-be-admired organisation—the political fund—to how companies run their affairs. First, they run them in an infinitely more democratic way. [HON. MEMBERS: "Oh."]Their activities are regulated by law. Secondly, no board of directors can pay a political donation unless it is within the powers given to it by the articles of association and memorandum of the company.

Mr. Clinton Davis: Will the hon. Gentleman give way?

Mr. Parkinson: No, I will not. Thirdly, at the annual general meeting, the amount paid over in political donations has to be revealed, and any shareholder can attend the annual general meeting, object to the fact that the donation has been paid, and make his point of view known. If there is widespread support for his view, the shareholders can refuse to adopt the accounts and they can order the company to cease paying the contributions. They have that right every year. This matter must be brought to their attention at every annual general meeting.

Mr. Anderson: Will the Minister give way?

Mr. Parkinson: No, I shall not. Only 350 of the top 1,000 companies subscribe to the Conservative Party, and two-thirds of the top 50 do not. Therefore, those who hold shares and who do not wish to contribute to the Conservative Party still have a wide range of options at their disposal, unlike those who work in closed shops and do not wish to be members of trade unions.
If a shareholder does not like the activities of the directors, he can sell his shares and move out. I should like to quote from remarks made by a much admired former Secretary of State for Trade, Mr. Edmund Dell, who said:
There is a difference in position between companies and trade unions, apart from the administrative problems which would be involved. The difference is that it is easy for a shareholder to contract out if he thinks fit."—[Official Report, 10 July 1968; Vol. 768, c. 510.]
The sums involved are relatively small. The average donation by companies is £200. I draw the attention of Labour Members to the consequences if the amendment were to be carried. All the amendments are technically defective, but, even if they were perfect, they would involve the erection of an elaborate and expensive bureaucratic system, imposing burdens on companies, shareholders and the Secretary of State which are completely disproportionate to the benefits to the shareholders. For example, there are requirements for two ordinary resolutions, special arrangements for shareholders' polls, the creation of a special fund, complicated provisions for distributions, regulations by statutory instrument and a review by the Secretary of State.
That is what the sums involved represent. From an extensive sample of companies in manufacturing and distribution, we know that political contributions have been equivalent to less than 0·1 per cent. of distributions by way of dividends, 0·02 per cent. of expenditure on fixed assets and 0·007 per cent. of turnover.

Dr. McDonald: Will the hon. Gentleman give way?

Mr. Parkinson: No, I shall not. People give directors the power to have control

over the assets of the company and to disburse huge sums of money on behalf of the shareholders. But the argument is that they are not to be trusted with taking a decision on behalf of their shareholders, which they can take only if they have the legal power, to disburse 0·007 per cent. of the turnover of the company.
Labour Members dressed up their words with talk about equity and justice. They would create an elaborate and totally unnecessary machinery to deal with a problem which exists only in their own warped minds.

Mr. Archer: The case for the amendments rests on the inconsistency between the position of a member of a trade union and the position of a company shareholder. That was the nature of the case as outlined by my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) when he introduced the amendments.
Judging from what the hon. Gentleman has just said, it seems to be common ground that there are certain parallels between the two situations. The company and the trade union are subject to law. Each is subject to its own rules and each has at least an occasional meeting of its members. The distinctions between them are twofold. First, a trade union has an identifiable political fund, and it decides democratically how that fund will be applied. My hon. Friends the Members for St. Helens (Mr. Spriggs) and Hackney, North and Stoke Newington (Mr. Roberts) described in some detail how those decisions were taken. Very frequently, they are taken at local level, at branch meetings or at district committee meetings.

Mr. Douglas Hogg: Late at night.

Mr. Archer: Possibly late at night, and for that very reason probably rather more democratically than the time of day at which the general meetings of most companies are held.
Shareholders' rights are rather more slender. Of course, they know what has happened to the political contributions. They know that after the event, when it is too late to influence the event. They know it because of section 19 of the Companies Act 1967. The Minister relied for part of his argument on that provision.
My memory is somewhat fallible these days as I advance into middle age. However, I do not seem to remember Conservative Members rushing into the Lobby to support that proposition. It is a power which is available to company shareholders. When they have the knowledge they can turn it to good account, because it is open to a shareholder to go to a company's general meeting and, if his rhetoric is up to it, sway the decision of the meeting. We all know the way in which that was done from time to time at annual general meetings of Lonrho and of some of the other companies that have been mentioned this evening. We know how all the cards were stacked in favour of the platform. We know how the accountants were ready to answer the arguments. However, I accept that it is a possible right available to company shareholders.
Surely not even the Minister would try to argue that there is not a distinction between the democratic control of the political funds of a trade union and control on the political donations of a company. If he believes that the two forms of control are genuinely parallel, he believes that the moon is made of green cheese.

Mr. Nicholas Baker: Does the right hon. and learned Gentleman agree that there is a distinction to be made between a trade union in which an individual is locked for his employment and a company in which an individual shareholder is not locked, although he may be partially committed?

Mr. Archer: I hope that the hon. Gentleman will have patience. I intend to deal with that argument. It is always open to a shareholder to get rid of his shares. I am aware of the argument and I promise the hon. Gentleman that I shall try to deal with it.
I have referred to the first distinction between the power of a member of the trade union and the power of a company.

Mr. Parkinson: rose—

Mr. Archer: I recollect that the hon. Gentleman did not give way to me, but that is not the difference between us.

Mr. Parkinson: I gave way to a number of the right hon. and learned Gentleman's

hon. Friends. I apologise it I did not give way to him.
In view of this great democratic stuff that the right hon. and learned Gentleman is giving us, will he explain how it could be that within three weeks of trade union leaders voting hundreds of thousands of pounds into the Labour Party election fund at the last general election 50 per cent. of the trade union movement's membership voted for the Conservative Party? Does not that worry him?

Mr. Archer: First, I am not sure that I accept that figure.

Mr. Garel-Jones: Was it 49 per cent.?

Mr. Archer: If the Minister is saying that the Conservative Party won the election, it is unhappily on the record that it did so. That is why we are having the debate. I do not propose to become involved in the political history of the past 12 months.
The second distinction is that in trade unions the accounts are kept quite separate. As my hon. Friend the Member for Thurrock (Dr. McDonald) said, each individual has a card which indicates what sum is attributable to that individual. That individual can take a decision on the destination of that specific sum. A company shareholder, in so far as he has any rights in the matter, can try only to influence a collective decision over a total fund. There is a clear inconsistency that is not explained by any distinction between the two situations.
6.45 pm
My right hon. and hon. Friends waited agog to hear what the Minister had to say about the explanation. We had to wait for the Minister. This is a debate about individual liberty, but exponents of individual liberty on the Government Benches did not flock into the Chamber to explain their views. Let us consider the Minister's explanation. He said, first, that it does not matter because companies do not give much, anyway. He quoted some figures. He ignored the argument advanced by some of my hon. Friends. At the outset of the debate my hon. Friend the Member for Thurrock referred to the front organisations, which we know are recipients of this form of generosity.
There are many more contributions of this sort which have not appeared in the


accounts. It was observed by my hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo) in an earlier debate that when Saatchi & Saatchi mounted a massive poster campaign not all that long ago it did not encounter a difficulty that the Labour Party meets from time to time. It finds that sometimes it is too late to book poster sites. Saatchi & Saatchi had every poster site that it wanted. The sites were made available to it. I am not sure that the cost of those poster sites appeared in the accounts in an identifiable form. That is the first comment that my right hon. and hon. Friends make about that part of the Minister's argument.
However, what is that, even if it is true, to do with the issue of principle? The proportion of the assets over which many individuals would like to make an individual decision are substantial sums to them. The Minister's argument appears to be simply that of the well-known Victorian housemaid who when accused of having a baby replied that it was only a little one.
The Minister argued that there are shortcomings in the administration of the political funds of trade unions. Even if that were true, I am not sure what would follow for the purpose of the debate. We are not debating trade unions. We are debating the rights of shareholders in companies.
If there are matters to which the trade unions should give their attention, we should know what they are. As I am talking of attention, Mr. Deputy Speaker, I wonder whether the Minister would do me the courtesy of paying me some. I tried to follow his speech.

Mr. John Smith: With difficulty.

Mr. Archer: As my right hon. Friend says, "With difficulty".

Mr. Douglas Hogg: The right hon. and learned Gentleman has been explaining the difference between trade unions and shareholdings in companies. It is a most interesting distinction. Is there not another difference on which he may care to reflect? The funds held by trade unions are essentially collective whereas the interest of the shareholder is limited to a readily identifiable and quantifiable shareholding.

Mr. Archer: I am not sure whether the hon. Gentleman's intervention was intended to argue in favour of the amendment or against it. It seems to tell in favour of it. As there is an identifiable proportion of the fund, which could be calculated arithmetically, the individual is entitled to say "My proportion of the fund shall"—or "shall not"—"be devoted to political purposes". That is the inference that I draw from the hon. Gentlman's intervention.
My right hon. and hon. Friends were waiting agog to hear what the Minister had to say about the shortcomings of the way in which trade unions apply their political funds.

Mr. Garel-Jones: rose—

Mr. Archer: I shall give way to the hon. Gentleman when I have completed this part of my argument. What was the hon. Gentleman's indictment when it emerged? What was the argument that was to conclude the debate? It transpired to be that many trade unionists who pay the political levy are not necessarily committed to the Labour Party. I assume that the implication is that every shareholder whose company contributes to the Conservative Party fund is totally committed to the philosophy of Disraeli. May I withdraw that remark, Mr. Deputy Speaker? If the shareholder were totally committed to Disraeli, he would not support the Government. However, even assuming that that were true, it would not allow for the many beneficiaries of institutional shareholdings. If they were asked about it, I am sure that not many of them would vote in favour of their minuscule contribution being directed to a campaign that resulted in the return of the Government and their present troubles.

Mr. Garel-Jones: The right hon. and learned Gentleman may be aware of a company that is in the position that he describes. However, in my trade union, as the hon. Member for Thurrock (Dr. McDonald) is well aware, the majority of the members have already opted out of the political fund. Therefore, they have taken a specific decision not to support the Labour Party. However, the union is still affiliated to the Labour Party. Does that seem to be equitable to the right hon. and learned Gentleman?

Mr. Archer: The hon. Gentleman seems to be making the very point that my right hon. and hon. Friends are making. They have exercised their democratict right to opt out of the political levy. That is their right. We wish them to share that right with other people. The union cannot use its part of the political fund for political purposes.
The Minister took up a point made in an intervention by the hon. Member for Grantham (Mr. Hogg). The hon. Member said that if a shareholder does not like a company's policy, he has a valid form of redress. He said that he had only to sell his shares and to invest in a different company. I notice that the hon. Gentleman is still awaiting an answer. It is perhaps a little unfair to tell a shareholder that if he wishes to exercise his right and to sell his shares—and the individual is entitled to such liberty—he must incur a loss if the timing is wrong and if prices are depressed. That is charging a fee for something that should be a free right.
The hon. Gentleman's suggestion was echoed by the Minister. He suggested a remedy that would operate after the mischief had run its course. Shareholders will learn of the destination of their political donations from the company balance sheet. The shareholder can only see what happened last year. If he disapproves of that, he may get up at the annual meeting and say that he wishes that it had not happened. He therefore has a right to slide the stable door across after the animal has galloped into the Conservative Party's coffers.
I was awaiting one other argument that did not materialise. It might have been argued that, even if the amendment were appropriate it should not be included in the Bill. However, the Minister accepts that that argument is unacceptable. My hon. Friend the Member for Hackney, Central (Mr. Davis) gave the Minister that option in Committee. If it had been the intention of the Government to include such legislation, we would have been content to leave it to parliamentary draftsmen.

Mr. Nicholas Baker: The right hon. and learned Gentleman has spoken about the mischief that might occur. In practice there is no mischief. Provided that

the directors have applied the company's funds for the purposes of the company, including paying contributions to a political party, they have benefited the shareholders. If mischief exists, it is that the shareholder does not wish to be associated with a political party. He therefore has a remedy. He can dissociate himself at a later stage.

Mr. Archer: The hon. Gentleman appears to argue that money which should be in the individual's control having been extracted and placed in the Conservative Party's coffers, the individual has a right publicly to state that he wishes that it had not happened. That right of dissociation is equivalent to saying that one must pay the bill at the same time as telling the waiter that one did not like the meal. We are arguing for a more effective form of dissociation.
We have listened to arguments against these amendments. We have dismissed them for the reasons that I have given. We always return to the rights of the individual. As my hon. Friend the Member for Keighley (Mr. Cryer) pointed out, we have listened to arguments from a party which professes concern about the right to a ballot. It professes to be concerned about an individual's right to express his view. Whenever industrial relations are discussed, the Conservative Party repeatedly expresses a Hippocratic dogma that we have come to expect. Perhaps I should have said that it expresses a hypocritical dogma.

Mr. Douglas Hogg: Hippocratic.

Mr. Archer: I agree that it is Hippocratic. For once I am prepared to stand corrected by the hon. Member for Grantham. When the Labour Party refers to precisely the same right of an individual to express a view, the Government do not wish to know. Tonight will not be the first time that power politics will vote against an attempt to establish the rights of the individual. However, at least the Conservative Party will have to use such power politics. Let the arguments, our stand and the Government's use of power to deny that right, go on the record.

Question put, That the amendment be made:—

The House divided: Ayes 117, Noes 170.

Division No. 207]
AYES
[6.55 pm


Alton, David
Fletcher, L. R. (Ilkeston)
Orme, Rt Hon Stanley


Anderson, Donald
Fletcher, Ted (Darlington)
Palmer, Arthur


Archer, Rt Hon Peter
Foot, Rt Hon Michael
Parker, John


Ashton, Joe
Ford, Ben
Powell, Raymond (Ogmore)


Atkinson, Norman (H'gey, Tott'ham)
Foulkes, George
Prescott, John


Barnett, Guy (Greenwich)
Fraser, John (Lambeth, Norwood)
Radice, Giles


Beith, A. J.
Garrett, John (Norwich S)
Richardson, Jo


Boothroyd, Miss Betty
Garrett, W. E. (Wallsend)
Roberts, Ernest (Hackney North)


Bradley, Tom
Graham, Ted
Rooker, J. W.


Bray, Dr Jeremy
Grant, John (Islington C)
Sever, John


Brown, Ronald W. (Hackney S)
Hamilton, W. W. (Central Fife)
Sheldon, Rt Hon Robert (A'ton-u-L)


Buchan, Norman
Harrison, Rt Hon Walter
Silkin, Rt Hon S.C. (Dulwich)


Callaghan, Jim (Middleton &amp; P)
Haynes, Frank
Silverman, Julius


Campbell-Savours, Dale
Healey, Rt Hon Denis
Smith, Rt Hon J. (North Lanarkshire)


Carmichael, Neil
Hogg, Norman (E Dunbartonshire)
Snape, Peter


Carter-Jones, Lewis
Home Robertson, John
Spearing, Nigel


Cartwright, John
Homewood, William
Spriggs, Leslie


Clark, Dr David (South Shields)
Hughes, Mark (Durham)
Stallard, A. W.


Cocks, Rt Hon Michael (Bristol S)
Hughes, Robert (Aberdeen North)
Steel, Rt Hon David


Coleman, Donald
Jones, Barry (East Flint)
Stewart, Rt Hon Donald (W Isles)


Cook, Robin F.
Kerr, Russell
Stoddart, David


Cryer, Bob
Kilfedder, James A.
Straw, Jack


Cunliffe, Lawrence
Lamond, James
Summerskill, Hon Dr Shirley


Cunningham, Dr John (Whitehaven)
Leadbitter, Ted
Tinn, James


Davis, Clinton (Hackney Central)
Litherland, Robert
Torney, Tom


Davis, Terry (B'rm'ham, Stechford)
Lyon, Alexander (York)
Wainwright, Richard (Colne Valley)


Deakins, Eric
Lyons, Edward (Bradford West)
Weetch, Ken


Dean, Joseph (Leeds West)
McDonald, Dr Oonagh
Welsh, Michael


Dormand, Jack
McKay, Allen (Penistone)
White, Frank R. (Bury &amp; Radcliffe)


Dubs, Alfred
Maclennan, Robert
Whitehead, Phillip


Duffy, A. E. P.
Marks, Kenneth
Whitlock, William


Dunwoody, Mrs Gwyneth
Maynard, Miss Joan
Wigley, Dafydd


Eadie, Alex
Mellish, Rt Hon Robert
Willey, Rt Hon Frederick


Eastham, Ken
Mikardo, Ian
Wilson, William (Coventry SE)


Edwards, Robert (Wolv SE)
Millan, Rt Hon Bruce
Winnick, David


Ellis, Raymond (NE Derbyshire)
Mitchell, R. C. (Soton. Itchen)
Woolmer, Kenneth


English, Michael
Morris, Rt Hon Charles (Openshaw)



Evans, John (Newton)
Morton, George
TELLERS FOR THE AYES:


Faulds, Andrew
Moyle, Rt Hon Roland
Mr. Hugh McCartney and


Field, Frank
Ogden, Eric
Mr. James Hamilton.


Flannery, Martin






NOES


Adley, Robert
Critchley, Julian
Hawksley, Warren


Alexander, Richard
Dean, Paul (North Somerset)
Hayhoe, Barney


Ancram, Michael
Dickens, Geoffrey
Heddle, John


Aspinwall, Jack
Dorrell, Stephen
Henderson, Barry


Atkins, Robert (Preston North)
Douglas-Hamilton, Lord James
Hicks, Robert


Baker, Nicholas (North Dorset)
Dover, Denshore
Hill, James


Beaumont-Dark, Anthony
Dunn, Robert (Dartford)
Hogg, Hon Douglas (Grantham)


Bell, Sir Ronald
Dykes, Hugh
Holland, Philip (Carlton)


Best, Keith
Edwards, Rt Hon N. (Pembroke)
Howell, Rt Hon David (Guildford)


Bevan, David Gilroy
Eggar, Timothy
Hunt, David (Wirral)


Blackburn, John
Elliott, Sir William
Jessel, Toby


Blaker, Peter
Eyre, Reginald
Jopling, Rt Hon Michael


Bowden, Andrew
Fairgrieve, Russell
Kellett-Bowman, Mrs Elaine


Boyson, Dr Rhodes
Fenner, Mrs Peggy
Knight, Mrs Jill


Braine, Sir Bernard
Fletcher, Alexander (Edinburgh N)
Knox, David


Bright, Graham
Fletcher-Cooke, Charles
Lawrence, Ivan


Brinton, Tim
Fookes, Miss Janet
Lawson, Nigel


Brocklebank-Fowler, Christopher
Fowler, Rt Hon Norman
Le Marchant, Spencer


Brown, Michael (Brigg &amp; Sc'thorpe)
Gardiner, George (Reigate)
Lennox-Boyd, Hon Mark


Browne, John (Winchester)
Gardner, Edward (South Fylde)
Lester, Jim (Beeston)


Bruce-Gardyne, John
Garel-Jones, Tristan
Lewis, Kenneth (Rutland)


Bulmer, Esmond
Glyn, Dr Alan
Lloyd, Peter (Fareham)


Burden, F. A.
Goodhew, Victor
Lyell, Nicholas


Cadbury, Jocelyn
Goodlad, Alastair
MacGregor, John


Carlisle, John (Luton West)
Gorst, John
MacKay, John (Argyll)


Carlisle, Kenneth (Lincoln)
Gray, Hamish
Major, John


Carlisle, Rt Hon Mark (Runcorn)
Grieve, Percy
Marlow, Tony


Chalker, Mrs. Lynda
Griffiths, Eldon (Bury St Edmunds)
Marshall, Michael (Arundel)


Chapman, Sydney
Griffiths, Peter (Portsmouth N)
Marten, Neil (Banbury)


Clark, Hon Alan (Plymouth, Suttton)
Grist, Ian
Mather, Carol


Clark, Sir William (Croydon South)
Grylls, Michael
Maude, Rt Hon Angus


Clarke, Kenneth (Rushcliffe)
Gummer, John Selwyn
Maxwell-Hyslop, Robin


Cockeram, Eric
Hamilton, Hon Archie (Eps'm&amp;Ew'll)
Mellor, David


Cope, John
Hamilton, Michael (Salisbury)
Meyer, Sir Anthony


Corrie, John
Haselhurst, Alan
Miller, Hal (Bromsgrove &amp; Redditch)


Costain, A. P.
Hawkins, Paul
Mills, Iain (Meriden)







Mills, peter, (West Devon)
Pollock, Alexander
Townend, John (Bridlington)


Moate, Roger
Powell, Rt Hon J. Enoch (S Down)
Townsend, Cyril D. (Bexleyheath)


Molyneaux, James
Price, David (Eastleigh)
Trippier, David


Monro, Hector
Proctor, K. Harvey
Vaughan, Dr Gerard


Montgomery, Fergus
Raison, Timothy
Wakeham, John


Morrison, Hon Charles (Devizes)
Rathbone, Tim
Waldegrave, Hon William


Morrison, Hon Peter (City of Chester)
Rees-Davies, W. R.
Walker, Bill (Perth &amp; E Perthshire)


Myles, David
Rhodes James, Robert
Walker-Smith, Rt Hon Sir Derek


Neale, Gerrard
Rifkind, Malcolm
Wall, Patrick


Needham, Richard
Shepherd, Colin (Hereford)
Waller, Gary


Nelson, Anthony
Skeet, T. H. H.
Walters, Dennis


Newton, Tony
Speed, Keith
Ward, John


Normanton, Tom
Speller, Tony
Warren, Kenneth


Nott, Rt Hon John
Spicer, Jim (West Dorset)
Wells, Bowen (Hert'rd &amp; Stev'nage)


Page, Rt Hon Sir R. Graham
Squire, Robin
Williams, Delwyn (Montgomery)


Page, Richard (SW Hertfordshire)
Stainton, Keith
Wolfson, Mark


Parkinson, Cecil
Steen, Anthony
Young, Sir George (Acton)


Parris, Matthew
Stewart, John (East Renfrewshire)
Younger, Rt Hon George


Patten, Christopher (Bath)
Stradling Thomas, J.



Patten, John (Oxford)
Tebbit, Norman
TELLERS FOR THE NOES


Pattie, Geoffrey
Thompson, Donald
Mr Robert Boscawen and


Peyton, Rt Hon John
Thorne, Neil (Ilford South)
Mr. David Waddington

Question accordingly negatived.

Clause 41

DISTRIBUTIONS OF INVESTMENT COMPANIES

7 pm

Amendments made:

No. 327, in page 49, leave out lines 1 to 18 and insert—

'(1) Subject to the following provisions of this section, an investment company may also make a distribution at any time out of its accumulated, realised revenue profits, so far as not previously utilised by distribution or capitalisation, less its accumulated revenue losses (whether realised or unrealised), so far as not previously written off in a reduction or reorganisation of capital duly made—'.

No. 328, in page 49, line 25, leave out '(5)' and insert '(1)'.

No. 329, in page 49, line 33, leave out from 'company' to 'consists' in line 36 and insert
'which has given notice in the prescribed form (which has not been revoked) to the registrar of its intention to carry on business as an investment company (the "requisite notice") and has since the date of that notice complied with the requirements set out in subsection (7A) below.
(7A) The requirements referred to in subsection (7) above are—
(a) that the business of the company'.

No. 330, in page 49, line 37, leave out 'land or other assets'.

No. 331, in page 49, leave out lines 40 to 44 and insert—
'(b) that none of the company's holdings in companies other than companies which are for the time being investment companies represents more than 15 per cent. by value of the investing company's investment;
(c) that distribution of the company's capital profits is prohibited by its memorandum or articles of association;

(d) that the company has not retained, otherwise than in compliance with this Part of this Act, in respect of any accounting reference period more than 15 per cent. of the income it derives from securities.
(7B) An investment company may not make a distribution by virtue of subsection (1) above unless its shares are listed on a recognised stock exchange and, during the period beginning with the first day of the accounting reference period immediately preceding the accounting reference period in which the proposed distribution is to be made or, where the distribution is proposed to be made during the company's first accounting reference period, the first day of that period and ending with the date of the distribution (whether or not any part of those periods falls before the appointed day), it has not—

(a) distributed any of its capital profits; or
(b) applied any unrealised profits or any capital profits (realised or unrealised) in paying up debentures or any amounts unpaid on any of its issued shares.
(7C) An investment company may not make a distribution by virtue of subsection (1) above unless the company gave the requisite notice—

(a) before the beginning of the period referred to in subsection (7B) above; or
(b) where that period began before the appointed day, as soon as may be reasonably practicable after the appointed day: or
(c) where the company was incorporated on or after the appointed day, as soon as may be reasonably practicable after the date of its incorporation.
(7D) A notice by a company to the registrar under subsection (7) above may be revoked at any time by the company on giving notice in the prescribed form to the registrar that it no longer wishes to be an investment company within the meaning of this section, and, on giving such notice, the company shall cease to be such an investment company.
(7E) Section 359(2) and (3) of the Income and Corporation Taxes Act 1970 and section 93(6)(b) of the Finance Act 1972 shall have effect for the purposes of subsection (7A)(b) above as those provisions have effect for the


purposes of subsection (1)(b) of the said section 359.
(7F) The Secretary of State may by regulations made by statutory instrument extend the provisions of this section, with or without modifications, to companies whose principal business consists of investing their funds in securities, land or other assets with the aim of spreading investment risk and giving their members the benefit of the results of the management of the assets.
(7G) Regulations made under subsection (7F) above—

(a) may make different provision for different classes of companies and may contain such transitional and supplemental provisions as the Secretary of State considers necessary; and
(b) shall not be made unless a draft of the regulations has been laid before Parliament and approved by a resolution of each House of Parliament.'

No. 332, in page 50, line 1, leave out subsections (8) to (12).—[Mr. Eyre.]

Clause 43

THE RELEVANT ACCOUNTS

Amendment made: No. 340, in page 54, line 42, at end add—
'"reserves" includes undistributable reserves within the meaning of section 40 above;'.—[Mr. Eyre.]

Clause 45

ANCILLARY PROVISIONS

Amendments made:

No. 334, in page 55, line 23, leave out subsection (1) and insert—

'(1) Where immediately before the appointed day a company is authorised by any provision of its articles to apply its unrealised profits in paying up in full or in part unissued shares to be allotted to members of the company as fully or partly paid bonus shares, that provision shall, subject to any subsequent alteration of the articles, continue to be construed as authorising those profits to be so applied after the appointed day.'.

No. 60, in page 56, line 9, leave out 'issued' and insert 'allotted'.—[Mr. Eyre.]

Clause 46

DIRECTORS TO HAVE REGARD TO INTERESTS OF EMPLOYEES.

Mr. Clinton Davis: I beg to move amendment No. 61, in page 56, line 34, at end insert—
'(2) Any trade union which is recognised by the company for the purpose of Part I of the Employment Protection Act 1975 may in

a representational capacity petition the court on behalf of any or all of the persons employed by the company to enforce the duty imposed upon directors of subsection (1) of this section.
(3) No such petition should be filed without leave of the court which may be obtained upon application to a judge of the High Court.'.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With this we will take amendment No. 62, in page 56, line 35. leave out subsection (2).

Mr. Clinton Davis: In Committee, the Minister of State said that he had spent a considerable time wrestling with the problem. For some reason he identified himself with the problems of a young man in a harem who on this occasion knew what he wanted, how to start his operations and accomplish his objectives. I do not agree with the conclusions that the Minister has reached in arriving at the so-called solution that he has presented to the House. It was interesting to observe that the Minister of State during the last debate represented to the House a thoroughly naive and idealised view of the sort of democroacy which operates in companies and which led him to this erring conclusion on this very important issue.
Clause 46(1) seeks to provide a mandatory duty on directors to have regard to the interests of employees, and then all the good work that that seeks to do is ruined by the addition of subsection (2) which will ensure that the employees have no way whatsoever of enforcing that obligation. There is to be no civil remedy for them. One is bound to ask why the Government bother to impose this mandatory duty at all if, in fact, it is incapable of enforcement.
I must say that the Government remind me of the practice indulged in by some people in their very early youth—that of ringing doorbells and running away when there is the slightest chance of the door being opened. That is what this is like.
In Committee the Minister ran away from all the real issues. I suggested to the Committee, as I do again today, to the House, that the role of the law on this subject is extremely important. Should the law be seen as an instrument of change or as a rather useless desiccated instrument which is insulated from the


real needs of a dramatically changing society? That is very germane to the subject we are considering.
My complaint about the clause is that it simply pays lip service to the expansion of the concept of co-partnership about which the Government prate so often. The clause perpetuates the inadequacies of the existing law.
The Minister of State often suggested to the Committee that the Government were proud to be even-handed on this matter. There is no even-handedness about this proposal. A shareholder can enforce the obligations which are imposed on directors. Minority shareholders have their rights strengthened under clause 71 of the Bill, but the employee must rest on the goodness of heart and the sense of propriety of the directors.
As my right hon. and learned Friend the Member for Warley, West (Mr. Archer) said in our last debate, not all directors are so munificent in the pursuit of their legal obligations. We heard of a number of companies where there had been no such pursuit at all.

Mr. Douglas Hogg: Can the hon. Member tell me what he means by the phrase "to enforce the duty" which is part of the amendment? Does it mean that the court should impose a penalty on directors for failure to discharge their duties, or does it mean alternatively that the court will undertake a supervisory role and direct the directors to act in future in a specified manner?

Mr. Davis: The Government have imposed a duty in subsection (1). This would not enable a criminal sanction to apply, but it would enable an employee to ensure that by resorting to an action in the courts the directors would fulfil their duty. That would be a matter for the courts to determine. I shall come to the question of vexatious litigation in due course.
The Government assert that they have somehow miraculously had a change of heart about all this. At one time—back in 1973—there was to be a permissive measure imported into the law. There was not to be a mandatory requirement for directors to take account of employees at all. Now the Government boast that they have fallen into line with some

of the more modern thinking. But if the provision is needed, who is it needed for? It must be needed for the company directors who do not fall into line with that naive concept of what a company director is all about, as outlined by the Minister of State. If he has said this once he has said it a dozen times during our debates. He claims that in well-run companies boards of directors further the interests of their shareholders by making sure that the interests of their employees are properly taken into account.
7.15 pm
Obviously the Government did not think that in practice, otherwise they would not have found it necessary to have this clause. What they are really saying is that they were wrong about this matter, that there are some laggards and therefore there must be legislation. Therefore, if there is a need to legislate to provide for rights of members of the company, why is it not right to see that employees have the same rights as well?
The Minister of State posed a number of arguments against this. He said that there would be an inducement to vexatious litigation. We have sought to provide a reasonable safeguard against that. We provide that:
No such petition should be filed without leave of the court which may be obtained upon application to a judge at the High Court".
One wonders whether legal aid is so bountiful that there will be a flood of litigation on this matter. It is all part of the way in which the Minister of State misleads himself. I believe that a flood of litigation on this score is absolutely fanciful. It is not a course to which most trade unions or employees will readily resort. But, on the other hand, one must take account of those workers to whom the Government proclaim so much fealty—those who are not trade unionists. Not all these people enjoy the benefits of collective bargaining arrangements which the trade unionists are able to enjoy. Why should they be shut out and be barred from a legal remedy?
We would say that people who work in an industry should be provided with at least similar rights to the sort of people who in the early 1970s played a substantial part in British industry—the asset-strippers. They claimed to be acting in the best interests of shareholders, but all too often they were denying ordinary


folk the rights of jobs and of a future in the work force. I would have thought that the elementary right that should be enjoyed by a member of that work force should at least be equal to that of the asset-stripper.
I believe that the Minister made another assertion when he said:
the duty to consider the interests of the employees is enforceable in the same manner as is any fiduciary duty, that is, by the company,"—[Official Report, Standing Committee A; 27 November 1979, c. 361.]
That is a strange way of articulating the law because, as we shall see in a later debate, we know that breaches of fiduciary duty can be validated by ordinary resolution in a general meeting. This is just one of those duties that could be so validated. It does not fall into that area of duty that cannot be validated or into the area of fraud, to which we shall refer later. Is it not certain, almost beyond peradventure, that if there is such a breach the shareholders would obviously validate the acts of the directors in refusing to take account of the interests of the work force? I can hardly imagine the contrary happening.
The Minister said that to provide employees with the sort of rights that he contemplates would put the employees in a precarious position as compared with the shareholders. That bodes well for amendment No. 126, which we shall discuss later. That amendment is designed to provide employees and others with rights under clause 71, where provision is made for granting relief against a company where members are unfairly prejudiced. The Under-Secretary of State cannot have it both ways. I hope that he will either repudiate what his Minister has said, or at least acknowledge that he will subscribe to the views that we are expressing on clause 71. There is a huge gap between both sides about employee rights. We ate offering genuine rights. The Government are offering an empty and wholly bogus gesture.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): Clause 46 as presently drafted imposes, by subsection (1), a duty on company directors to have regard in the performance of their functions to the interests inter alia of the company's employees in general. By subsection (2), this new duty is submitted to

the existing fiduciary duties of company directors, in the sense that breach of it is made actionable in the same way as any other fiduciary duties owed by the directors to the company. I shall come to the point raised by the hon. Member for Hackney, Central (Mr. Davis) on this matter in due course.
I wish to show how far these two amendments would have the effect of changing the persons who would be able to sue for a breach of the new duty created by subsection (1). In the first place, it would be clear that the duty would be actionable at the suit of trade unions recognised by the company for the purpose of part I of the Employment Protection Act 1975—that is, for the purpose of collective bargaining on behalf of the company's employees.
Secondly, it is unusual to have a duty created by statute which is enforceable by one person on behalf of others, but not by those latter, and because of the common law principle that a statutory duty created for the protection of given persons is usually to be construed as enforceable by those persons, it is highly likely that these amendments would permit individual employees of the company concerned to sue for breach of the duty created by subsection (1).
Thirdly, because a director's duties in the performance of his functions are owed to the company of which he is a director, and those duties are enforceable, in accordance with the exceptions to the rule in Foss v Harbottle, by a member on behalf of the company, it is highly probable that these amendments would leave the duty created by subsection (1) actionable in this way by a member of the company.
Broadly, therefore, the effect of these amendments would be to make the duty of directors to have regard to employees, interests created by subsection (1) of clause 46 enforceable by the company's members, the company's employees and, on the latter's behalf, by trades unions recognised by the company for the purposes of collective bargaining.
The hon. Gentleman may have thought that he had brought forward a proposal which was simple, and which would even make a positive contribution. With respect, I ask him to consider the position


that would be created were these amendments to be brought into effect. I hope that I have demonstrated that the consequence of his amendments would be to give rise to the possibility of a multiplicity of actions. The directors of a company would become something of a sitting target for actions brought by a whole range of litigants.

Mr. Clinton Davis: Will the Minister address his mind to subsection (3) of amendment No. 61, which provides the sort of safeguards—which apply already over a wide range of litigation—to avoid vexatious and frivolous litigation? It emphasises markedly that point.

Mr. Eyre: I understand the hon. Gentleman's thoughts in that respect, but I do not think that they are watertight. I wish to emphasise that there is great importance attached to collective bargaining by many Opposition Members. They would not, I believe, think that court proceedings were by any means the best way to—

Mr. Clinton Davis: I cannot understand the Minister's logic. He is saying that collective bargaining arrangements would prevail, and that people would not pursue remedies in the courts, but the next moment he is saying that there would be a multiplicity of vexatious and frivolous actions.

Mr. Eyre: I am indicating that one would have reservations about the line of thought pursued by the hon. Gentleman with regard to the availability of the right of action. I am pointing out that the right of action would be very much more widespread than he contemplated at the time that he drafted the amendments.
Another example of the potentially disruptive effect that these amendments would have stems from the fact that a union recognised for collective bargaining purposes may represent only a small percentage of the employees of a given company, and there may be several of them so recognised. Any one of them could sue on behalf of all employees if it were thought that all employees' interests had been disregarded. However, there is no way of knowing what would happen if one only of several recognised unions wished to sue and the

others did not wish to do so. There is, further, the possibility that each union could take separate actions. Either way, there would be a grave risk that vexatious actions would be encouraged.
The Opposition amendment represents a substantial change of approach. Until last May, their policy was to make the duty to have regard to the interests of employees owed, in some sense, to those employees. The hon. Member for Oldham, West (Mr. Meacher) who was a Minister at that time, explained, in relation to the clause introduced by his Government, that
The principal effect of the clause will therefore be—this is very much inherent in our reasoning—to give directors a shield against attack where they act with due regard to employees' interests, rather than to give employees a sword to use against them when they do not.
The Opposition's arguments in Committee against clause 46 were not consistent with that statement. The hon. Member for Oldham, West said that his Government did not wish
to encourage employees to look to the courts as a natural forum for the resolution of industrial relations disputes."—[Official Report, Standing Committee F, 8 March 1979; c. 856–8.]
That was the point that I was trying to make to the hon. Member for Hackney, Central at an earlier stage.
Under the terms of these amendments, there is created a real danger of disruptive effects upon the activities of companies. The effect of these amendments would be to lessen the prospect of investment in and success of our companies, and, consequently, would be against the long-term interests of employees.
In seeking to resist the amendments recommend that clause 46, as drafted, provides precisely what is needed. It emphasises that a company's best interests are served when the directors have regard to the interests of employees and it does so in a way which makes it part of the directors' fiduciary duty which is owed to the company. The clause does not aim to give employees a cause of action, because we think it right that the enforceability of the directors' duty to the company should remain clear and unambiguous and, as with other fiduciary duty, it should be the company which has the right to take action.
7.30 pm
It must not be forgotten that employees have many rights to take action against directors under various other statutes. We are, therefore, not trying in the clause to create a new right of action for employees. What we want to do is to encourage directors to take seriously the need to take a broader view of the interests of the company so that their consideration of their employees' interests will improve to the standard of the best companies.
It has been generally recognised that the extent of the directors' obligation to take account of the interests of employees has for some years been unclear. That is the reason for the clause. I hope that hon. Members will agree with me that the clause properly redresses the situation and thereby makes a contribution to the success of our companies, upon which the well-being of our economy so much depends.

Mr. Clinton Davis: I have the feeling that the hon. Gentleman is drawing to a close and he has not dealt with my argument about the validation of breaches of the provision by directors. That validation can occur at a general meeting with an ordinary resolution. Does not that render the whole thing a farce?

Mr. Eyre: The hon. Gentleman underrates the sense of obligation properly experienced among the great mass of companies. The purpose of the clause is to declare the true position. In those circumstances it is unlikely that the sort of case that the hon. Gentleman envisages will develop.

Mr. Nicholas Baker: I agree with the comments of my hon. Friend the Under-Secretary about the nature of the amendments, which seem to be a recipe for industrial guerrilla warfare. I am sure that the hon. Member for Hackney, Central (Mr. Davis) is well aware of their implications. Litigation does not have to be vexatious or frivolous in order to snare a company and prevent it from being properly managed.
I wish to make two brief points. I am concerned about the new duty that the clause imposes on directors. My concerns are not entirely technical. First, the clause does not exclude action brought by an employee, as distinct from an employee

or shareholder, to enforce the duty owned by directors to a company. Subsection (2) says that the duty is enforceable "in the same way" as other fiduciary duties. It it, therefore, conceivable that an employee or a trade union might be entitled to enforce the duty and to produce the litigation about which my hon. Friend is right to be worried.
My second point arises out of the words "enforce the duty" in the amendment and relates to the position of directors when the interests of employees and shareholders conflict, for example, in the case of a takeover or when a branch of a company's business that was highly labour-intensive was making a loss.
Are the directors to close the branch or business even though the employees argue that it would become more profitable with further capital investment? I see a posibility of conflict there. I hope that my hon. Friend will consider my concerns and perhaps give me some reassurance.

Mr. Clinton Davis: The hon. Member for Dorset, North (Mr. Baker) has missed the bus. All that directors have to do is to take account of the interests of the work force. They must not dismiss matters lightly or ignore those interests, but if they properly take them into account and come to a conclusion that the work force does not find agreeable they could not be held liable under our provisions.
I hope that the Under-Secretary will not take my remarks as being personally offensive, because he knows that I have a high regard for him, but his emollient explanation was thoroughly unconvincing. Of course, he has to pass on what is handed down by the Minister for Trade, but what he was handed was a sham.
There is no question of an evenhanded approach. I cannot accept that what we are doing would lead to industrial guerrilla warfare. There is a satisfactory safeguard in subsection (3). We feel that the Government should have met us on this point and the fact that they have chosen not to do so means that we shall divide the House.

Mr. Eyre: I shall reply briefly to my hon. Friend the Member for Dorset, North (Mr. Baker). I must emphasise the importance of the fact that the duty is


subsumed in the fiduciary duty of directors to the company as a whole. That is a proper answer to my hon. Friend's first question.
On my hon. Friend's second point, the hon. Member for Hackney, Central (Mr. Davis) pointed out that directors are under an obligation to take account of the interests of workers. It does not mean that, automatically, all problems could be solved. I urge the House to accept that the clause sets out the basis of the best principle that applies in companies and I believe that its incorporation in our law will have a beneficial effect.
The hon. Member for Hackney, Central usually asks whether there has been consultation with the TUC. He did not do so on this occasion, but I can tell him that in July my right hon. Friend the

Secretary of State wrote to the general secretary of the TUC to inform him that it was our intention, following discussions, to introduce such a clause. The general secretary replied on 4 July:
You said that you would be prepared to look again at the case for including in the Companies Bill a clause on the duties of directors to state the principle that directors should have due regard, inter alia, to the interests of employees. This would fit naturally into the present Bill and would constitute, as I think we both agreed, a long overdue opportunity to bring company law more into line with good company practice.
Those were true and accurate comments and on that basis I ask the House to reject the amendment.

Question put, That the amendment be made:—

The House divided: Ayes 102, Noes 160.

Division No. 208]
AYES
[7.40 pm


Alton, David
Field, Frank
Mitchell, R. C. (Soton Itchen)


Anderson, Donald
Flannery, Martin
Morris, Rt Hon Charles (Openshaw)


Ashton, Joe
Fletcher, L. R. (Ilkeston)
Moyle, Rt Hon Roland


Atkinson, Norman (H'gey, Tott'ham)
Fletcher, Ted (Darlington)
Ogden, Eric


Barnett, Guy (Greenwich)
Ford, Ben
Palmer, Arthur


Beith, A. J.
Foulkes, George
Parker, John


Boothroyd, Miss Betty
Fraser, John (Lambeth, Norwood)
Powell, Raymond (Ogmore)


Bradley, Tom
Garrett, W. E. (Wallsend)
Prescott, John


Bray, Dr Jeremy
Graham, Ted
Radice, Giles


Brown, Ronald W. (Hackney S)
Grant, John (Islington C)
Roberts, Ernest (Hackney North)


Buchan, Norman
Grimond, Rt Hon J.
Rooker, J. W.


Callaghan, Jim (Middleton &amp; P)
Hamilton, James (Bothwell)
Sever, John


Campbell-Savours, Dale
Hamilton, W. W. (Central Fife)
Silverman, Julius


Carmichael, Neil
Harrison, Rt Hon Walter
Smith, Rt Hon J. (North Lanarkshire)


Carter-Jones, Lewis
Haynes, Frank
Snape, Peter


Cartwright, John
Hogg, Norman (E Dunbartonshire)
Spearing, Nigel


Clark, Dr David (South Shields)
Home Robertson, John
Spriggs, Leslie


Cocks, Rt Hon Michael (Bristol S)
Homewood, William
Stewart, Rt Hon Donald (W Isles)


Coleman, Donald
Hughes, Mark (Durham)
Stoddart, David


Cook, Robin F.
Hughes, Robert (Aberdeen North)
Straw, Jack


Cryer, Bob
Lamond, James
Summerskill, Hon Dr Shirley


Cunliffe, Lawrence
Leadbitter, Ted
Tinn, James


Davis, Clinton (Hackney Central)
Litherland, Robert
Welsh, Michael


Davis, Terry (B'rm'ham, Stechford)
Lyon, Alexander (York)
White, Frank R. (Bury &amp; Radcliffe)


Deakins, Eric
Lyons, Edward (Bradford West)
Whitehead, Phillip


Dormand, Jack
McCartney, Hugh
Whitlock, Williiam


Dubs, Alfred
McDonald, Dr Oonagh
Wigley, Dafydd


Duffy, A. E. P.
McKay, Allen (Penistone)
Willey, Rt Hon Frederick


Dunwoody, Mrs Gwyneth
Maclennan, Robert
Wilson, William (Coventry SE)


Eadie, Alex
McNamara, Kevin
Winnick, David


Eastham, Ken
Marks, Kenneth
Woolmer, Kenneth


Edwards, Robert (Wolv SE)
Maynard, Miss Joan



Ellis, Raymond (NE Derbyshire)
Mellish, Rt Hon Robert
TELLERS FOR THE AYES:


English, Michael
Mikardo, Ian
Mr. Joseph Dean and


Evans, John (Newton)
Millan, Rt Hon Bruce
Mr. George Morton.


Faulds, Andrew






NOES


Adley, Robert
Blackburn, John
Browne, John (Winchester)


Alexander, Richard
Blaker, Peter
Bruce-Gardyne, John


Alison, Michael
Boscawen, Hon Robert
Bulmer, Esmond


Ancram, Michael
Bowden, Andrew
Burden, F. A.


Aspinwall, Jack
Boyson, Dr Rhodes
Cadbury, Jocelyn


Atkins, Robert (Preston North)
Braine, Sir Bernard
Carlisle, John (Luton West)


Baker, Nicholas (North Dorset)
Bright, Graham
Carlisle, Kenneth (Lincoln)


Beaumont-Dark, Anthony
Brinton, Tim
Carlisle, Rt Hon Mark (Runcorn)


Bell, Sir Ronald
Brocklebank-Fowler, Christopher
Chalker, Mrs. Lynda


Best, Keith
Brotherton, Michael
Chapman, Sydney


Bevan, David Gilroy
Brown, Michael (Brigg &amp; Sc'thorpe)
Clark, Hon Alan (Plymouth, Suttton)




Clarke, Kenneth (Rushcliffe)
Knox, David
Peyton, Rt Hon John


Cockeram, Eric
Lawrence, Ivan
Pollock, Alexander


Cope, John
Lawson, Nigel
Powell, Rt Hon J. Enoch (S Down)


Corrie, John
Le Marchant, Spencer
Price, David (Eastleigh)


Critchley, Julian
Lennox-Boyd, Hon Mark
Proctor, K. Harvey


Dean, Paul (North Somerset)
Lester, Jim (Beeston)
Raison, Timothy


Dickens, Geoffrey
Lewis, Kenneth (Rutland)
Rathbone, Tim


Dorrell, Stephen
Lloyd, Peter (Fareham)
Rees-Davies, W. R.


Dover, Denshore
Lyell, Nicholas
Rhodes James, Robert


Dunn, Robert (Dartford)
MacGregor, John
Rhys Williams, Sir Brandon


Edwards, Rt Hon N. (Pembroke)
MacKay, John (Argyll)
Shepherd, Colin (Hereford)


Elliott, Sir William
Major, John
Skeet, T. H. H.


Eyre, Reginald
Marlow, Tony
Speed, Keith


Fairgrieve, Russell
Marshall, Michael (Arundel)
Speller, Tony


Fenner, Mrs Peggy
Marten, Nell (Banbury)
Spicer Jim (West Dorset)


Fletcher, Alexander (Edinburgh N)
Mather, Carol
Stainton, Keith


Fookes, Miss Janet
Maude, Rt Hon Angus
Steen, Anthony


Fowler, Rt Hon Norman
Maxwell-Hyslop, Robin
Stewart, John (East Renfrewshire)


Gardner, Edward (South Fylde)
Mellor, David
Stradling Thomas, J.


Garel-Jones, Tristan
Meyer, Sir Anthony
Tebbit, Norman


Glyn, Dr Alan
Miller, Hal (Bromsgrove &amp; Redditch)
Thompson, Donald


Goodhew, Victor
Thorne, Nell (Ilford South)


Gorst, John
Mills, Iain (Meriden)
Townend, John (Bridlington)


Griffiths, Eldon (Bury St Edmunds)
Mills, Peter (West Devon)
Townsend, Cyril D. (Bexleyheath)


Griffiths, Peter (Portsmouth N)
Moate, Roger
Trippier, David


Grylls, Michael
Molyneaux, James
Vaughan, Dr Gerard


Gummer, John Selwyn
Monro, Hector
Wakeham, John


Hamilton, Hon Archie (Eps'm&amp;Ew'll)
Montgomery, Fergus
Waldegrave, Hon William


Hamilton, Michael (Salisbury)
Morrison, Hon Charles (Devizes)
Walker, Bill (Perth &amp; E Perthshire)


Hawkins, Paul
Morrison, Hon Peter (City of Chester)
Walker-Smith, Rt Hon Sir Derek


Hawksley, Warren
Myles, David
Wall, Patrick


Hayhoe, Barney
Neale, Gerrard
Waller, Gary


Heddle, John
Needham, Richard
Ward, John


Henderson, Barry
Nelson, Anthony
Warren, Kenneth


Hicks, Robert
Newton, Tony
Watson, John


Hill, James
Normanton, Tom
Wells, Bowen (Hert'rd &amp; Stev'nage)


Hogg, Hon Douglas (Grantham)
Nott, Rt Hon John
Williams, Delwyn (Montgomery)


Holland, Philip (Carlton)
Page, Rt Hon Sir R. Graham
Wolfson, Mark


Hunt, David (Wirral)
Page, Richard (SW Hertfordshire)
Young, Sir George (Acton)


Jessel, Toby
Parkinson, Cecil
Younger, Rt Hon George


Jopling, Rt Hon Michael
Parris, Matthew



Kaberry, Sir Donald
Patten, Christopher (Bath)
TELLERS FOR THE NOES:


Kellett-Bowman, Mrs Elaine
Patten, John (Oxford)
Mr, David Waddington and Lord James Douglas-Hamilton.


Knight, Mrs Jill
Fattie, Geoffrey

Question accordingly negatived.

Clause 47

CONTRACTS OF EMPLOYMENT OF DIRECTORS

Mr. Eyre: I beg to move amendment No. 309, in page 57, line 10, leave out 'agreement' and insert 'employment'.

Mr. Deputy Speaker: With this it will be convenient to take amendment No. 63, in page 57, line 11, after second 'by', insert 'reasonable'.
No. 64, in page 57, line 11, after 'notice', insert not exceeding six months'.
Government amendments Nos. 310 to 314, 242, 315 and 316.
No. 65, in page 57, line 44, at end insert not exceeding six months'.

Mr. Eyre: Although this appears to be a large group of amendments, all are of a technical nature and have been tabled in response to representations made both to the Government and to the Opposition,

chiefly by the Law Society, to which we are grateful for bringing these matters to our attention.

Amendment agreed to.

Amendments made: No. 310, in page 57, line 14, after 'is', insert 'or is to be'.

No. 311, in page 57, line 19, after 'is', insert 'or is to be'.

No. 312, in page 57, line 23, leave out 'his employment' and insert
'he is to be employed.'

No. 313, in page 57, line 24, leave out from 'group' to end of line 26.

No. 314, in page 57, line 28, leave out 'the later' and insert 'that further'.

No. 242, in page 57, line 33, at end insert 'proposed'.

No. 315, in page 57, line 42, leave out 'but instead the agreement' and insert
'and that agreement and in a case where subsection (3) above applies the original agreement'.

No. 316, in page 57, line 43, leave out 'the agreement' and insert 'it'.—[Mr. Eyre.]

Clause 48

SUBSTANTIAL PROPERTY TRANSACTIONS INVOLVING DIRECTORS, ETC.

Mr. Eyre: I beg to move amendment No. 404, in page 58, leave out lines 13 to 20 and insert—

(a) whereby a director of the company or its holding company or a person connected with such a director is to acquire one or more non-cash assets of the requisite value from the company; or
(b) whereby the company acquires one or more non-cash assets of the requisite value from such a director or a person so connected;

Mr. Deputy Speaker: With this it will be convenient to discuss also Government amendments Nos. 401, 276, 277, 278 and 285.

Mr. Eyre: This group of amendments deals with the definition of a non-cash asset for the purpose of clause 48. The original clause was criticised on the grounds that, because certain transactions were created rather than transferred, an asset would escape the scope of the clause. On reviewing the clause, we agreed with the substance of those criticisms. Amendment No. 404 sets out a simpler redraft of clause 40(1)(a) and (b).

Amendment agreed to.

Mr. Deputy Speaker: Amendment No. 67. Not moved.

Sir Graham Page: On a point of order, Mr. Deputy Speaker. If amendment No. 67 is not moved, may I move No. 378, which is grouped with it?

Mr. Deputy Speaker: Yes, if the right hon. Gentleman so wishes.

Sir G. Page: I beg to move amendment No. 378, in page 59, line 1, after 'voidable', insert 'within a reasonable period'. This should be taken with amendment No. 69, in page 59, line 13, leave out 'within a reasonable period'.
The effect of the subsection as it appears in the Bill is that the arrangements there referred to would remain voidable notwithstanding that they had been affirmed in general meeting if the affirmation took place after the expiration of a reasonable period. By the amendments, the right of rescission would be exercised within a reasonable period. The right drafting to overcome that difficulty

should be that the words "within a reasonable period" should be deleted from line 11—that is, amendment No. 378—and inserted in line I after the word "voidable".

Mr. Eyre: The effect of amendments Nos. 67, 88 and 378 would be to limit the right of the company to set aside transactions whatever the circumstances and whether or not those who had retained the property transferred were knowingly in contravention of the relevant sections. If, for example, a director had manipulated offers so that he had obtained for a derisory price, without approval under clause 48, a lucrative income-producing property which he retained after the expiry of the period for the exercise of the company's right of avoidance—that is, six months under amendment No. 67 or "a reasonable period" under amendment No. 378—why should he not be compelled to restore it to the company in exchange for the money he paid for it? The company should surely have the option of suing for an indemnity or an account of profits, or for restitution of the property.
As clauses 48 and 52 stand, restitution is possible only if bona fide rights of innocent third parties have not intervened. If, for example, the property acquired by the director is consequently sold to a purchaser who is unaware of the nature of the dealings between the director and the company, the company will be unable to recover the property and would be left with an action against the director.
These amendments are therefore not needed in order to protect innocent third parties: we have already further ensured such protection by the insertion of the word "actual" before "notice" in clause 48(3)(b) and in clause 52(1)(b). In practice, therefore, these amendments would severely restrict the remedies available to the company without increasing the protection of the innocent third party. I therefore urge the House to reject the amendments.

Sir G. Page: With respect, I am not in the least concerned with amendment No. 67, which would only mess the whole thing up if it were accepted. I am concerned with amendments Nos. 378 and 69. If they are not accepted, nobody knows when this arrangement becomes affirmed and valid and, for ever, anybody


dealing with that arrangement in the background will never know when his own arrangements are confirmed. The arrangement will remain for ever rescindable. That is not something that should be allowed.
These are simple amendments and I urge my hon. Friend to look at them again. My amendment No. 378, combined with that which was already on the Amendment Paper—No. 69—would simplify the clause, would, with great respect to my hon. Friend, give protection to third parties, and would make some sense of the clause. Otherwise, it will be extremely difficult for anyone to deal with these matters after such an arrangement, even though it has been approved and confirmed by the company in general meeting. If the company has not confirmed it in a specific time, the arrangement remains voidable for ever.
I press my hon. Friend to look again at this to see whether he can accept the amendments here and now to correct an error in the clause.

Mr. Eyre: I believe that I have answered my right hon. Friend in the main, but of course I will look at the matter again to make sure that we have got it right.

Amendment negatived.

Amendment made: No. 273, in page 59, line 10, at beginning insert 'actual'.

Amendment proposed: No. 286, in page 59, line 21, after 'subsection', insert 'but subject to subsection (4A) below'.—[Mr. Eyre.]

Mr. Deputy Speaker: With this we may discuss the following.

Government amendment No. 287.

Amendment No. 379, in page 59, line 39, at end add
and he may apply to the court for such relief (which the court shall have power to grant to him) as the court might grant him in proceedings under the foregoing provisions of this section'.

Government amendments Nos. 288 and 289.

8 pm

Sir Graham Page: Amendment No. 379, which stands in my name, gives certain rights under clause 48. The amendment is reasonable and everybody seems to want to save time by not explaining

amendments. I shall not detain the House by explaining the amendment, but I ask my hon. Friend to explain why he believes that it is unreasonable.

Mr. Eyre: The intention behind amendment No. 379 is similar to the intention behind the Government amendments. However, the effect of amendment No. 379 is unclear. It seeks to extend protection for the directors authorising prohibited transactions and for connected persons by empowering them to apply to the court for relief. We have produced the same result by ensuring that such people will not be liable unless there is knowledge of the relevant circumstances which constitute the contravention. The amendment does not appear to extend protection to a director who is involved in the transaction either directly or through a connected person. It would be unjust to impose a liability on such a director if he has taken all practical steps to prevent such prohibited transactions from taking place. Our amendments are in accord with the intentions behind amendment No. 379, but our amendments are more effective and complete. I hope that my right hon. Friend will not press his amendment.

Sir C. Page: I shall not press the amendment.

Amendment agreed to.

Amendments made:

No. 290, in page 59, line 21, leave out 'or transaction'.

No. 276, in page 59, line 22, leave out 'or a person nominated by it'.

No. 291, in page 59, line 26, leave out 'or transaction' and insert:
'or any transaction entered into in pursuance of such an arrangement'.

No. 277, in page 59, line 29, leave out
'or the person so nominated'.

No. 245, in page 59, line 32, after 'any', insert 'other'.

No. 278, in page 59, line 33, leave out:
'and any person so nominated'.

No. 287, in page 59, leave out line 36 and insert—
. (4A) Where an arrangement is entered into by a company and a person connected with a director of the company or its holding company in contravention of this section, that director shall not be liable under subsection (4) above if he shows that he took all reasonable steps to secure the company's compliance


with this section, and, in any case, a person so connected and any such other director as is mentioned in that subsection shall not'.—[Mr. Eyre.]

Clause 49

PROHIBITION OF LOANS, ETC., TO DIRECTORS AND CONNECTED PERSONS

Amendment made: No. 279, in page 60, line 6, after 'or', insert 'of'.—[Mr. Parkinson.]

Clause 50

EXCEPTIONS FROM S. 49

Amendment proposed: No. 403, in page 60, line 43, at end add—
'(1A) Subsection (1)(b) of that section shall not prohibit a relevant company ("the creditor") from making a quasi-loan to one of its directors or to a director of its holding company if—

(a) the quasi-loan contains a term requiring the director or a person on his behalf to reimburse the creditor his expenditure within two months of its being incurred; and
(b) the aggregate of the amount of that quasi-loan and of the amount outstanding under each relevant quasi-loan does not exceed £1,000.
For the purposes of this subsection, a quasi-loan is relevant if it was made to the director by virtue of this subsection by the creditor or by its subsidiary or, where the director is a director of the creditor's holding company, any other subsidiary of that company; and "amount outstanding" has the same meaning as in section 56(6) below.'.—[Mr. Parkinson.]

Mr. Deputy Speaker: With this we may discuss the following amendments:

No. 75, in page 61, leave out lines 3 and 4.

No. 76, in page 61, leave out lines 5 to 15.

Government amendments Nos. 280, 281, 282 and 283.

No. 78, in page 61, leave out lines 35 to 38.

No. 79, in page 61, line 39, leave out 'subsection (3)(c)' and insert 'subsection (2)(b), (3)(c) and (3)(d)'.

No. 80, in page 62, line 13, leave out subsection (5).

No. 373, in page 62, line 14, leave out from 'only' to first 'the' in line 19 and insert 'if'.

Government amendments Nos. 284, 243 and 260.

No. 84, in page 62, leave out lines 33 and 34.

No. 85, in page 62, line 35, leave out subsection (6).

Sir Graham Page: There seems to be an unholy alliance to cut out speeches from the Back Benches and to skip through the amendments so that nobody knows what they are about. I wish to address the House on amendment No. 373, which seeks to amend the setting out of exceptions to clause 49 in connection with prohibiting certain loans to directors. The exception made to clause 50(5) is that certain loans, if they satisfy the conditions in clause 50(5)(a) and (b), are permitted if they are of a certain amount.
The part of the clause which I wish to amend is that which affects banks when lending to their own directors. Under the Bill they will find it extremely difficult to prove what is their normal commercial terms or course of business. It is unnecessary to put restrictions on such loans. The definition of the ordinary course of a company's business is a matter for subjective judgment which may not be shared by a bank and the Department. Great uncertainty will arise. The clause imposes an unnecessary restriction tion on that type of loan. Such a loan cannot mislead anybody if it is made by the banks to their directors. It sets aside an executive director of a bank as a second-class individual who cannot obtain a loan in the same way as anybody else.

Mr. Parkinson: The Government's amendments to the clause are technical and have been tabled in response to helpful comments made in Committee from both sides and by various bodies, including the Law Society.
The effect of amendment No. 373 would be to remove the requirement that a loan or quasi-loan made by a money-lending company to its director should be in the ordinary course of that company's business. The Government view is that the condition that such a transaction should be in the ordinary course of a company's business provides an extra safeguard which will prevent companies from contemplating the making of transactions which are not part of their normal business activities. That was the reason behind the inclusion of the words. We think that they serve a useful purpose. I hope that in the circumstances


my right hon. Friend the Member for Crosby (Sir G. Page) will not press his amendment.

Amendment agreed to.

Amendments made: No. 280, in page 61, line 10, leave out 'to' and insert 'in respect of'.

No. 281, in page 61, line 11, leave out 'entered into than' and insert:
'made than that or those which'.

No. 282, in page 61, line 12, leave out 'for', and insert
'to or in respect of'.

No. 283, in page 61, line 13, leave out from 'person' to end of line 15 and insert
'but unconnected with the company'.

No. 284, in page 62, leave out lines 27 and 28 and insert
but unconnected with the company;'

No. 243, in page 62, line 30, leave out from 'not' to 'to' in line 31 and insert 'a recognised bank'.

No. 260, in page 62, leave out lines 33 and 34 and insert—
'In determining for the purposes of this subsection the aggregate of the relevant amounts, a company which a director does not control shall be deemed not to be connected with him.'.—[Mr. Newton.]

Clause 51

RELEVANT AMOUNTS

Mr. Parkinson: I beg to move amendment No. 341, in page 64, line 6, clause 51, leave out from 'which' to end of line 7 and insert
'that value has been reduced'.

Mr. Deputy Speaker: With this we are to take Government amendment No. 342.

Mr. Parkinson: This amendment corrects a minor defect in the wording of clause 51.

Amendment agreed to.

Clause 52

CIVIL REMEDIES FOR BREACH OF S. 49

Amendments made:

No. 274, in page 64, line 17, at beginning insert 'actual'

No. 267, in page 64, line 17, leave out
'who is not a party to the arrangement or transaction'
and insert

'other than the person for whom the transaction or arrangement was made'.

No. 288, in page 64, line 21, after 'subsection', insert
'but subject to subsection (3) below'.

No. 246, in page 64, line 31, after 'any', insert 'other'.

No. 289, in page 64, leave out line 34 and insert—
'(3) Where an arrangement or transacton is entered into by a company and a person connected with a director of the company or its holding company in contravention of section 49, that director shall not be liable under subsection (2) above if he shows that he took all reasonable steps to secure the company's compliance with that section, and, in any case, a person so connected and any such other director as is mentioned in that subsection shall not he'.—[Mr. Newton.]

Clause 53

CRIMINAL PENALTIES FOR BREACH OF S. 49

Mr. Parkinson: I beg to move amendment No. 256, in page 64, line 38, leave out 'wilfully'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 257, 258, 259, 294, 295 and 296.

Mr. Parkinson: This group of amendments gives effect to our review of the wording of clause 53, which imposes criminal sanctions on directors, companies and others in respect of transactions prohibited under clause 49. We undertook to carry out this review following the helpful points made by my right hon. Friend the Member for Crosby (Sir G. Page) on the drafting of the clause. It is in response to his representations that these changes are being made.

Amendment agreed to.

Amendments made:

No. 257, in page 64, line 40, leave out 'in contravention of' and insert
'knowing or having reasonable cause to believe that the company was thereby contravening'

No. 258, in page 65, line 1, leave out 'knowingly'.

No. 259, in page 65, line 2, leave out 'in contravention of' and insert
'knowing or having reasonable cause to believe that the company was thereby contravening '

No. 294, in page 65, line 4, leave out 'person' and insert 'relevant company'.

No. 295, in page 65, line 5, leave out 'he' and insert 'it'.

No. 296, in page 65, line 6, leave out 'he' and insert 'it'.—[Mr. Newton.]

Clause 54

SUBSTANTIAL CONTRACTS, ETC., WITH DIRECTORS AND OTHERS TO BE DISCLOSED IN ACCOUNTS

Mr. Parkinson: I beg to move amendment No. 252. in page 66, line 10, leave out '(b)'.
The amendment extends the scope of clause 54(3) to all cases where a holding company does not produce group accounts. It is a technical amendment that corrects an oversight in the drafting of the clause.

Amendment agreed to.

Mr. Parkinson: I beg to move amendment No. 298, in page 66, line 16, leave out 'arrangement or agreement' and insert 'or arrangement'.

The Deputy Chairman: With this it will be convenient to take Government amendments Nos. 299, 300, and 301.

Mr. Parkinson: This is a group of drafting amendments that will clear up anomalies and inconsistencies in the clause as it stands, regarding the use of the words "arrangement" and "agreement" in subsections (4) and (6). The terms used in those subsections, as amended, will be consistent with the use of the terms in subsections (1) and (2).

Amendment agreed to.

Amendments made:

No. 299, in page 66, line 22, leave out 'arrangement or agreement' and insert 'or arrangement'.

No. 300, in page 66, line 36, leave out 'and arrangements' and insert ', arrangements and agreements'.

No. 301, in page 66, line 37, leave out first 'or'.

No. 302, in page 66, line 42, after 'directors', insert
'or a director of its holding company'.—[Mr. Parkinson.]

Clause 56

PARTICULARS OF AMOUNTS OUTSTANDING TO BE INCLUDED IN ACCOUNTS

Mr. Parkinson: I beg to move amendment No. 292, in page 69, line 7, at end add—
'(2A) Subsection (2) above shall not apply in relation to any transaction, arrangement or agreement made by a recognised bank for any of its officers or for any of the officers of its holding company.'.

Mr. Deputy Speaker: With this it will be convenient to discuss amendment (a) to the principal amendment, proposed in line 1, leave out 'subsection (2)' and insert 'subsections (2) and (3)'.

Mr. Parkinson: This amendment exempts recognised banks from the need to publish in their accounts the aggregate figures of loans and so on, to officers other than directors. I commend this amendment to the House.
Amendment (a), in the name of my right hon. Friend the Member for Crosby (Sir G. Page), would have the effect of releasing recognised banks from the obligation to publish aggregate figures of loans to directors and connected persons. I hope that my right hon. Friend will appreciate, for the reasons that we discussed at some length in Committee, that the Government cannot accept this amendment.

Sir Graham Page: I do not wish to press amendment (a).

Amendment agreed to.

Mr. Parkinson: I beg to move amendment No. 271, in page 69, line 29, at end add—
'(4A) Where by virtue of section 150(2) of the 1948 Act a company does not produce group accounts in relation to any financial year subsections (2) and (3) above shall have effect in relation to the company and that finacial year as if the word "group" were omitted.'.
This amendment performs the same function for clause 56 as amendment No. 252, which we have already discussed, does for clause 54.

Amendment agreed to.

Clause 57

FURTHER PROVISIONS RELATING TO RECOGNISED BANKS

Amendment made:

No. 293, in page 70, line 12, at end add—
'(2A) It shall be the duty of the auditors of the company to examine any such statement before it is made available to the members of the company in accordance with subsection (2) above and to make a report to the members on that statement; and the report shall be annexed to the statement before it is made so available.
(2B) A report under subsection (2A) above shall state whether in the opinion of the auditors the statement contains the particulars required by subsection (2) above and, where their opinion is that it does not, they shall include in the report, so far as they are reasonably able to do so, a statement giving the required particulars.'.—[Mr. Parkinson.]

Clause 58

TRANSACTIONS, ETC., EXCLUDED FROM SS. 54 AND 57

Mr. Parkinson: I beg to move amendment No. 248 in, page 71, line 28, leave out from beginning to 'and' and insert 'person'. This is a purely technical amendment which enables the de minimis provisions in clause 58 (4) to operate effectively.

Amendment agreed to.

Amendment made:

No. 342, in page 71, line 30, leave out from 'which' to 'has' in line 31 and insert
'the value of those transactions, arrangements and agreements'.—[Mr. Parkinson.]

Clause 59

DISCLOSURE BY DIRECTORS OF INTERESTS IN CONTRACTS, ETC.

Mr. Eyre: I beg to move amendment No. 249, in page 71, line 36, leave out from 'to' to 'made' in line 37 and insert
'any transaction or arrangement (whether or not constituting a contract)'.
The amendment has the effect of extending the disclosure requirement in section 199 of the 1948 Act so as to require directors to disclose their interests in all types of transactions and arrangements.

Amendment agreed to.

Clause 60

POWER TO INCREASE FINANCIAL LIMITS UNDER PART IV

Mr. Clinton Davis: I beg to move amendment No. 93, in page 72, line 5, leave out from 'shall' to end of line 6 and insert
'require the approval of both Houses of 'Parliament'
The Minister said, on 4 December:
I think that, having regard to the weight and substance and importance of this matter, it was right to proceed by way of negative resolution."—[Official Report, Standing Committee A, 4 December 1979; c. 533]
I take the point. If it were a matter of such
weight and substance and importance
one would have thought that the affirmative resolution procedure would be the more accurate to pursue. I do not follow the Minister's logic, and therefore, in following his suggestion, we have tabled the amendment. We feel that this is a matter of substance and importance which should therefore require the approval of both Houses of Parliament.

Mr. Eyre: The purpose of clause 60 is to give the Secretary of State power to raise any of the financial limits mentioned in clauses 48 to 50. The effect of an order made under this clause would therefore be to relax restrictions, and as such would be a proper subject for a negative resolution, whatever I or anyone else may have said in Standing Committee. Affirmative resolutions are considered necessary where more stringent rules are imposed, and we see no reason to depart from standard parliamentary practice in this case. It is for that reason that we resist the amendment.

Sir Graham Page: With great respect, I say that my hon. Friend the Minister has just endeavoured to lay down a new rule of convention, that if a statute is being relaxed the affirmative resolution procedure is unnecessary. I have never heard that argument before. It is nowhere in the book, if I may so put it. It is not a rule. There is no convention or rule of this House as to what shall be subject to the negative resolution procedure and what shall fall under the affirmative resolution procedure. Certain items are normally subject to the affirmative resolution procedure while others go


under the negative resolution procedure. It is, however, a matter of judgment in each case.
In this case, the Secretary of State might be altering by statutory instrument certain limits set by the Bill. From the point of view of changing the law, it does not matter whether he is increasing or decreasing those limits. In certain cases, if he is increasing them he is not relaxing the law for those on the other side of the picture. He may be relaxing the law with regard to a director who wants a loan, but that means that he is not relaxing it for the shareholders. Therefore, there is no reason for saying that orders which increase the amounts in the Bill in this respect are relaxing the law. That does not follow.
Even if that were a rule or convention, which it certainly is not, if my hon. Friend had risen and said that the Government did not want to waste the time of the House or Standing Committees by bringing these matters forward each time on an affirmative resolution, he would have had a good case. This is merely a matter of judgment for a Minister who has to conduct the Bill as to what is done in this respect.
If the affirmative resolution procedure is used, that need not lead to a waste of time in the House or in Standing Committee. If no one wishes to object, the matter can go through on the nod. But the value of using the affirmative resolution procedure is that the Government must bring the issue before the House. We all know how difficult it is to get a prayer debated on the Floor of the House. We all know of cases where a statute has provided for the negative resolution procedure, where prayers have been put on the Order Paper to initiate the procedure, but where the prayers have never been debated.
Arrangements have to be made through the usual channels, but those channels do not always flow freely. They are frequently blocked, and prayers are not heard. This is, therefore, one of those cases where the Secretary of State intends at some time to alter some vitally important figures in the Bill, and that should be covered by the affirmative resolution procedure.

Mr. Eyre: I am most grateful to my right hon. Friend the Member for Crosby (Sir G. Page) for his guidance on these matters. I noted that he said that there were no rules as to the use of the respective procedures, and I am sure that that will be noted by the hon. Member for Hackney, Central (Mr. Davis), just as it will be noted by me. I bow to my right hon. Friend's experience in these matters. The nuances which relate to this part of parliamentary procedure are not commonly understood. I appear to have given perhaps the wrong reason for the right amendment. In the light of what my right hon. Friend said, I shall, of course, carefully examine the wording of the amendment.

Mr. Clinton Davis: I do not think that it is open to the Minister to examine it now. He must either accept or reject the amendment, because, as I understand it, this amendment could not be dealt with in another place in relation to the next stages of the Bill. I could adopt the arguments of the right hon. Member for Crosby (Sir G. Page), but I do no more than adopt the arguments of the Minister who, when addressing his mind to this matter in Committee, referred to it as one of
weight and substance and importance
If it is of such
weight and substance and importance".—
and I am sure that the Minister would not demur from that opinion now—that it is appropriate that we should deal with the issue by way of the affirmative resolution procedure.
I think that the Minister might have been addressing himself to having no procedure available for the scrutiny of these matters by the House. That, of course, would have been intolerable.
In this matter the Minister would be wise to give way and to confer upon the House a duty that it ought to perform on occasions such as this, not by causing the Government to undergo a particularly arduous operation, but merely to affirm this matter, as will be the duty of another place. I hope that the Minister will go some way—I suggest that it is the only way—towards meeting his right hon. Friend and myself by accepting the amendment.

Sir Graham Page: If I may have leave to speak again, I wish to press the matter


upon my hon. Friend the Under-Secretary of State. He put his argument hesitatingly, and I believe that in his heart he was agreeing with my argument. It is not a political matter. There is nothing political about it. If it were otherwise, I should not have joined with the hon. Member for Hackney, Central (Mr. Davis)—

Mr. Clinton Davis: Thank you very much.

Sir G. Page: —in pressing it on my hon. Friend. There is no harm in accepting the amendment. It would recognise the duty of the House to consider important changes which may be made by the Secretary of State by statutory instrument under this clause.

Mr. Eyre: I have listened carefully to what has been said by my right hon. Friend the Member for Crosby (Sir G. Page) and to the proposition advanced by the hon. Member for Hackney, Central (Mr. Davis), but I regret that, for a practical reason, I cannot accept the amendment.
My right hon. Friend said that it was a matter of judgment by the Minister responsible for a clause of this kind. It is likely that the financial limits mentioned will have to be revised, and I think it right in these circumstances for the matter to be dealt with on the basis set out in the Bill. Although I pay great attention, of course, to the points made by my right hon. Friend, I think that it would be right to resist the amendment.

Amendment negatived.

Clause 61

SHADOW DIRECTORS

Amendment proposed: No. 251, in page 72, line 12, leave out 'subsection (2)' and insert 'subsections (2) and (5)'.—[Mr. Eyre.]

Mr. Deputy Speaker: We shall consider at the same time the following amendments:

No. 380, in page 72, line 14, after 'act', insert
'or a person otherwise able to control the policy of the company'.

No. 381, in line 14, after 'act', insert

'or a person otherwise able materially to influence the policy of the company'.

No. 95, in line 16, leave out 'are accustomed so to', and Government amendment No. 303.

Mr. Clinton Davis: I shall speak to our amendments Nos. 380 and 381. In our view, the words in the subsection are imprecise and require elucidation. The object which the Government seek to achieve here is not in dispute between us. Our concern is to achieve the necessary precision. The words of the subsection are as follows:
Subject to subsection (2) below, a person in accordance with whose directions or instructions the directors of a company are accustomed to act ('a shadow director') shall be treated for the purposes of this Part of this Act as a director of the company "—
and so on.
The phrase "accustomed to act" assumes that the directors will be to some extent subservient to the activities of an individual on more than one occasion. If a person causes considerable damage by reason of a single act and he is someone who, in effect, controls or materially influences the policy of the company, that piece of conduct on his part may cause just as much damage as would a series of actions on his part.
In our view, it would be far better if the Minister were to adopt the words which we suggest, which, in my judgment are in no way redundant to the objectives which he seeks. I hope that he will not rule out our proposal because it may not accord with his briefing. It is a sensible proposal. I do not consider that the words "accustomed to act" are sufficient. The precision needed here is not available in the subsection, and I hope that the Minister will give a positive response to our suggestion.

Mr. Eyre: Opposition amendments Nos. 380 and 381 appear to add something to the definition of "shadow director", but I believe that their intention is already comprised by the clause as drafted. I understand the emphasis which the hon. Member for Hackney, Central (Mr. Davis) puts upon the phrase, but when we speak of a director being "accustomed to act" on the directions or instructions of another person, we are referring to someone who, although not


one of the duly appointed directors, exerts a permanent influence over the board. I do not think that the amendments add to that concept.
The use of the word "otherwise" in amendments Nos. 380 and 381 may refer to the apparent limitation represented by the use of "directions or instructions" as the instruments of control by a shadow director. But I am advised that the sense of "directions and instructions" is wide enough to enable a court to look at the facts in each particular case. I appreciate the time and trouble to which the hon. Gentleman has gone in tabling these amendments and in presenting the arguments to the House. But on the grounds of the advice that I have received, I must advise the House to reject the two amendments as well as amendment No. 95.

Mr. Clinton Davis: With the leave of the House, Mr. Deputy Speaker. I do not think that that offers any reasonable explanation for the rejection of these proposals.

Mr. David Hunt: It does.

Mr. Davis: The Parliamentary Private Secretary may think that it does, but he agrees with absolutely every word and breath of his Minister. He is the most loyal PPS that I have ever seen, but then, he ought to have been a Minister.
What the Minister has not said, and I do not think that he can say it, is that the words that we are suggesting in amendments Nos. 380 and 381 would in any way injure the purpose which he is seeking to serve. At most he is saying that they are redundant or otiose, and that is not a submission that I am able to accept. I think that there is something inadequate about using the term "accustomed to act" simpliciter. That seems to suggest that there must be a series of acts undertaken before a director would be deemed a shadow director within the meaning of the subsection. I do not think that that is a satisfactory state of affairs, and that is what amendments Nos. 380 and 381 seek to cure.

Mr. Eyre: I am most anxious to accept the reasoning of the hon. Gentleman, because I appreciate the thought and effort that he has put into the amendments. However, a good deal of effort has also gone in to the detailed

consideration of the amendments which he has tabled. We do not consider that a single act of control—and the hon. Gentleman spoke of this—should qualify a person as a shadow director. What we are after is a person who persistently influences the company. Almost anyone could be responsible for advising on one act, but that should not count as control.

Amendment agreed to.

Amendment made: No. 303, in page 72, line 43, at end insert—
'(5) A body corporate shall not be treated as the director of any of its subsidiary companies by reason only of subsection (1) above.'—[Mr. Le Marchant]

Clause 62

CONNECTED PERSONS

Mr. Eyre: I beg to move amendment No. 261, in page 73, line 11 at end add
'or, (d) a person acting in his capacity as partner of that director or of any person who, by virtue of paragraph (a), (b) or (c) above, is connected with that director,'
This amendment extends the circle of connected persons for the purpose of this part of the Bill to partners of directors or directors' connected persons. I think that this is a logical and sensible extension, given that companies with which directors are associated are also deemed to be connected persons of such directors. I therefore commend it to the House.

Amendment agreed to.

Clause 63

INTERPRETATION OF PART IV

Mr. Eyre: I beg to move amendment No. 268, in page 74, leave out lines 13 to 20.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendment No. 402.

Mr. Eyre: These are both practical amendments. They provide a redefinition of quasi-loans for the purposes of part IV.

Amendment agreed to.

Mr. Clinton Davis: I beg to move amendment No. 98, in page 74, line 22, at end insert
'relevant company, for the purposes of section 49(1)(b), shall mean any company'.

Mr. Deputy Speaker: With this it will be convenient to discuss amendment No. 99, in page 74, leave out lines 23 to 28.

Mr. Davis: The basic aim of the amendment is to extend the definition of "relevant company" from a public company, for the purposes of this part of the Bill, to a private company. I hope that the Minister will explain shortly why he feels that the extension is inappropriate.

Mr. Eyre: Amendment No. 99 is consequential to amendments Nos. 71 to 74. As those amendments were not accepted, I hope that I may safely assume that Labour Members will not wish to press these amendments.
The effect of amendment No. 98 is to extend to all companies the prohibitions concerning quasi-loans to directors and loans and quasi-loans to directors and connected persons. As drafted, the prohibitions apply only to public companies and to companies within groups containing a public company.
I remember that I explained the Government's reason for rejecting this unnecessary extension of the prohibition when the issue was discussed in Committee. I see no reason for developing the argument, except to remind the hon. Gentleman that it was felt that the restrictions which were of importance in large organisations should not be imposed upon smaller companies, which are often controlled by families and by those much more intimately concerned in the control and day-to-day administration. Therefore, there is less reason for the rules to apply to smaller companies. That is why we have limited them to larger companies.

Mr. Clinton Davis: There are many substantial private companies that are larger than some public companies. If there is no definition that can be ascribed to size, we are confronted with a difficult problem. However, this is not the time to press the issue. The Government are reviewing this very area, as I was when I was the Under-Secretary of State for Trade. It will be useful when the Government are able to publish their proposals with some definition. That will resolve a difficult problem.

Amendment negatived.

Mr. Eyre: I beg to move amendment No. 262, in page 74, line 24, leave out 'a public' and insert 'not a private'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 263 to 266.

Mr. Eyre: The meaning of the expression "relevant company" in clause 63 is at present linked to the new definitions of "public" and "old public" companies in part I of the Bill. These definitions do not become operational until the clay appointed by the Secretary of State for their coming into effect. We do not wish the implementation of the provisions of part IV to be delayed to another part of the Bill whose entry into force will necessarily have to await some passage of time as it is dependent, for example, on the preparation of statutory forms. We have therefore revised this part of clause 63 so that part IV may be implemented independently of part I.

Amendment agreed to.

Amendments made: No. 263, in page 74, line 26, leave out 'a public' and insert 'not a private'.

No. 264, in page 74, line 27, leave out 'a public' and insert 'not a private'.

No. 265, in page 74, line 28, leave out 'a public' and insert 'not a private'.

No. 266, in page 74, leave out lines 30 to 32.

No. 402, in page 74, line 32, at end add—
'(1A) for the purposes of this Part of this Act—

(a) a quasi-loan is a transaction under which one party ('the creditor') agrees to pay, or pays otherwise than in pursuance of an agreement, a sum for another ('the borrower'), or agrees to reimburse, or reimburses otherwise than in pursuance of an agreement, expenditure incurred by another party for another ('the borrower')—


(i) on terms that the borrower (or a person on his behalf) will reimburse the creditor; or
(ii) in circumstances giving rise to a liability on the borrower to reimburse the creditor;
(b) any reference to the person to whom a quasi-loan is made is a reference to the borrower; and
(c) the liabilities of a borrower under a quasi-loan include the liabilities of any


person who has agreed to reimburse the creditor on behalf of the borrower.'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 339, in page 74, leave out lines 43 to 45.

Mr. Deputy Speaker: With this we may take Government amendment No. 304, and the following amendments:

No. 100, in page 74, line 35, leave out from 'goods' to end of line 36 and insert
'under a hire purchase agreement or conditional sale agreement or sells any land under a conditional agreement'.

No. 101, in page 74, line 37, leave out 'any land or'.

No. 102, in page 74, line 38, at end insert:
'or leases any land in return for periodical payments'.

Mr. Eyre: Amendments Nos. 339 and 304 are technical. The definition of the beneficiary of a credit transaction is misplaced in subsection (2) as drafted. The reference to credit transaction in subsection (5) is tautologous. The two Government amendments put the drafting straight. I commend them to the House.

Mr. Clinton Davis: The Minister has made the point that we sought to make in Committee. He has met our amendments and we are perfectly satisfied.

Amendment agreed to.

Amendments made: No. 244, in page 75, line 6, leave out 'agrees' and insert 'is liable'.

No. 304, in page 75, line 35, leave out 'it is made for him' and insert:
'he is the person to whom goods or services are supplied, or land is sold or otherwise disposed of, under the transaction; '.—[Mr. Eyre.]

Clause 65

PROHIBITION ON STOCK EXCHANGE DEALS BY INSIDERS, ETC.

Mr. Parkinson: I beg to move amendment No. 106, in page 78, leave out line 18 and insert:
'in those securities, knowing or having reasonable cause to believe that that person would deal in them on a recognised stock exchange'.

Mr. Deputy Speaker: With this we may take Government amendments Nos. 107, 108 and 110.

Mr. Parkinson: These amendments are necessary to correct a technical defect in clause 65, making it an offence where an individual is prohibited from dealing on a recognised stock exchange to counsel or procure such dealing.

Mr. Anderson: We are not convinced that this is a technical amendment. We are not very happy about the addition. I hope that the Minister will give a clearer explanation. We recognise the difficulty and technicality of such legislation. How important is the further provision in the subsection that the insider knows or believes that the person to whom the information is passed is likely to deal? What will be the effect of the addition? We are not convinced that it is necessary.
Presumably the Government's argument is that there is insufficient mens rea and that that adds to the guilty mind. However, sufficient mens rea has already been established. The individual insider, according to clause 65, has to know that he is prohibited. He has to know that he is in possession of unpublished price sensitive information.
We commend a possible alternative to the Government. If the Government argue that there is an insufficient test of mens rea in the present wording, why not create a rebuttable presumption, that by communicating the information to an outsider evidence has been given of the intention that the outsider should act on that information?
The other consideration is that by the addition of this phrase to the subsection the Government are putting an additional fence in front of the prosecution in the steeplechase that they have created. It adds to our fears that the legislation will be ineffective in leading to convictions, whatever may be the deterrent effect of the new insider provisions.
The insider could say "I gave him the information but it was up to him whether he acted on it. How was I to know?" That would be a clear defence and a further large hole in the net. It makes one wonder whether the fisherman is serious about catching the fish.
The accountancy profession has told us that the new penal clauses in respect of insider dealing will slow down disciplinary proceedings within professions. If


it is unlikely that a conviction will succeed the insider may be better off, particularly bearing in mind the rule of the DPP not to sanction prosecutions unless there is a SO per cent. chance of success. Against our views, the Government have not assisted the prosecution over detection with a cadre of inspectors on whom it can rely for pursuing offenders.
We fear that not only will prosecutions not succeed but, in view of the obstacle course created, they may not even be sanctioned. We are not happy about the erection of a further hurdle to the prospects of a successful prosecution.

Mr. Parkinson: The hon. Member for Swansea, East (Mr. Anderson) makes a serious point. In my brief introduction I said that the amendments correct technical defects to clause 65, which makes it an offence, where an individual is prohibited from dealing on a recognised stock exchange, to counsel or procure such dealings. By virtue of clause 67, it is similarly an offence to counsel or procure off-market dealing, where the individual is prohibited from such dealing. However, as drafted, there might be no offence if the individual counselled or procured another person to deal either on a recognised stock exchange or off-market or without indicating where the dealing was to be done.
These amendments remove that problem by making it an offence to counsel or procure dealing where the individual knows or has reasonable cause to believe that the dealing would be done on a recognised stock exchange, in the case of clauses 65 and 66, or off-market, in the case of clause 67. Therefore, where the procurer knew that the dealing would be either on a recognised stock exchange or through an off-market dealer, but did not know or care which would be used, he will not escape the provisions of the clauses as he might do as they are presently drafted.
Far from not seeking to tighten up that particular law, the amendments are a further earnest of the Government's intent to make sure that the law is as watertight as possible.

Mr. Clinton Davis: My hon. Friend the Member for Swansea, East (Mr. Anderson) does not dissent from the Minister's explanation. However, we are

presented with a highly complex set of proposals in the Bill, which will shortly be enacted. I should like to take this opportunity—and I hope that I will not be ruled out of order—to suggest that it might be helpful if the Government, having regard to the substantial changes taking effect in the Bill, will publish a White Paper or some guidance on the purpose of the various provisions. I hope that the Minister will consider the possibility of making available some form of explanatory document relating to the Bill shortly after its enactment. Perhaps it might be possible to do this before the Bill is considered in another place. However, I concede that this might not be possible.

Mr. Parkinson: With the leave of the House, Mr. Deputy Speaker, I agree that the hon. Member for Hackney, Central (Mr. Davis) has made a fair point. I do not know whether it is practicable. I expect that when all these amendments are incorporated in the Bill and the Bill, as finally amended, is reprinted, the hon. Member will realise that it is a crystal-clear piece of legislation and that his proposal will be unnecessary. However, without giving any sort of undertaking, I note what he says and I shall consider the matter.

Mr. Clinton Davis: I am not thinking of the parliamentarians who have been involved in this Bill and its predecessor. I am thinking mainly of the public—the company directors and secretaries who will have to wrestle with these complicated problems. I am not suggesting that these people should not consult with lawyers and accountants with alacrity—indeed, I have a vested interest in seeing that they do, as has almost every other hon. Member in the House at present.

Sir Graham Page: The hon. Member is undermining that vested interest, especially if he writes articles. If the Department issues a circular it will take the ground away from under the feet of the person who writes articles.

Amendment agreed to.

Sir Graham Page: I beg to move amendment No. 399, in page 78, line 29, at end insert—
'(a) entering into a transaction relating to the securities of a company with a person to whom he has disclosed his connection and the nature thereof with the company.'.

Mr. Deputy Speaker: With this we may take the following amendments: No. 376, in page 78, line 30, at end insert 'solely'.

No. 375, in page 78, line 35, after 'as', insert 'mortgagee, chargee,'.

Sir G. Page: Clause 65 (1) forbids anyone connected with a company, dealing on a recognised stock exchange or through an off-market dealer in securities of the company with which he is connected, if he has, by virtue of that connection, any inside information which could affect the price of the securities and which he would not be expected to disclose to an outsider.
As clause 65(8) stands, the subsection provides for the lifting of the ban that I have mentioned when the person concerned is not dealing for profit-making, loss-avoidance or in certain other specified circumstances. There is an anxiety that directors will always be deemed to have both a connection and the information which could bring them within the prohibitions of clause 65(1). There is also anxiety that clause 65(8) provides no real escape even if a director is, for example, selling because he needs the cash. Is it possible for him to say that he has no view about profiting from that sale? It would be difficult for any director, even when acting quite genuinely, to bring himself within the terms of subsection (8).
9 pm
To make the proviso in subsection (8) a little more reasonable, I have proposed in amendment No. 376 that the word "solely" should be inserted into the paragraph, which would then read
doing any particular thing otherwise than with a view solely to the making of a profit".
That would provide some relief, and would not be harmful to anyone who buys from or sells to the director the shares of a company.
Even if the House were to accept that modest amendment, I do not think that it would relieve the anxiety which is prevalent about the director being unable to buy or sell the shares of the company of which he is a director through stock exchange procedure. The essence of insider dealing is that it is fraudulent. One cannot be said to defraud a person if that person knows the facts and acts with his eyes open.
If it is possible to inform the other party in any deal that in such a transaction he is dealing with an insider, and inform him of the nature of that insider's connection with the company, there can be no misrepresentation either expressed or implied. If there is no misrepresentation, there cannot be any fraudulent misrepresentation.
Amendment No. 399 seeks to lift the ban in clause 65(1) if the person connected with the company discloses to the other party that connection. I recognise that the difficulty is to establish how a director can so disclose if he is dealing on the stock exchange and has put his shares on the market. He could not do so if he were buying securities in that company. In such a case he would not be able to bring himself within the terms of my proposed amendment, and he would have to seek a private deal.
I believe that the director who wishes to sell his shares, which he holds in his own company, would have to be given some escape clause to deal with those shares. The prohibition set by clause 65, if it remains as it is, so radically alters the present practice that some new practice must be devised. If a new practice can be based on the fact that the person selling the shares, if he be a director of the company, discloses that fact, there can be no essence of fraud in the deal which is implied by calling it insider dealing.
Perhaps in future it will be necessary—if a director puts his shares on the market—for those shares to be marked. It may be that he is thereby a second class shareholder. If there is some marking of the shares being offered for sale it will provide the director with an opportunity to sell his shares. By that means he would be disclosing to the other person in the deal his connection with the company and the fact that he might have information.
Amendment No. 375 deals with clause 65(8)(b), which lifts the ban on transactions in the course of the exercise, in good faith, of the functions of a liquidator, receiver or trustee in bankruptcy. Such persons have a duty to others to sell at the best price and if they do not do so, for fear that information that they have about the company may prevent their doing so, they are surely in breach of their duty to the beneficiaries for whom they are acting. That is the reason


for the lifting of the ban on liquidators, receivers and trustees in bankruptcy.
However, a mortgagee of shares, if exercising his power of sale as a mortgagee also has a well-recognised duty in law. His duty is to the mortgagor and is to sell at the best price. If he is connected with a company and has information that may affect the price of the shares he may find a conflict between his duty to the mortgagor to sell at the best price and his obligations under the clause not to carry on insider dealings.
However, a mortgagee is in exactly the same position in this respect as a liquidator, a receiver or a trustee in bankrutcy and I submit that mortgagees and chargees should be specifically mentioned in the lifting of the ban.

Mr. Parkinson: My right hon. Friend's important group of amendments deals with a problem which we discussed at length in Committee and about which a number of people have since written to me.
I know that a number of directors feel that they would be unwise to hold shares in their own companies after the Bill becomes law. They feel that they will be in possession of almost the sort of information that might make them insiders. I believe that the fears can be overstated and the matter boils down to a debate about whether directors are regularly in possession of information that, if known, would move the price.
It is incontrovertible that directors know more about their businesses than does anyone else, but the number of occasions in a year when directors have the sort of information that, if known, would move the price are few. Since the Committee stage I have discussed the matter actively with a number of business men. I ask them "Is your business doing quite well?" and they reply "Yes, quite well." When asked, "Well enough that, if known, the price would move?" they say, "Oh, no. The price does not move because I know the business is doing well. The price moves in certain circumstances that I know full well—when there is a bid, when we suddenly discover an asset that we did not think was worth very much is suddenly valuable".
That sort of thing, when we know it—we know it very rarely—moves the

price. I should, therefore, like to take this opportunity to repeat what t said in Committee. It is difficult not to repeat oneself at this stage of the Bill. I believe that, in practice, the difference between the sort of information that would move the price and the general information that directors, by their very position, inevitably possess will not be difficult, over a period of time, to define. I believe that it will be possible, but there is a real fear. My right hon. Friend, in typically thoughtful fashion, has tried to find three ways to help. I must tell him, however, that I do not find his arguments as acceptable as his ambitions.
I should like to deal with the individual amendments. Amendment No. 399 is something of a left-over from the 1978 Bill, where it was envisaged that transactions would take place off the market and that there would be face-to-face transactions. This was built into the 1978 Bill as a defence against face-to-face transactions where a person said "I am selling something to you. You should know that I am a director of this business, and I have some pretty hot information." If he said that, the person with whom he was dealing was put on notice.
My right hon. Friend alluded to the difficulty about his amendment in his opening speech. The difficulty arises in applying that type of defence to a market arrangement. My right hon. Friend said that they would have to move these deals off the market and that they would have to do them in some other way. We have thought about the matter carefully. I must tell my right hon. Friend that, for the reasons I gave in Committee and to which I have alluded today, it would be a very difficult defence to apply. In the circumstances, we cannot accept it.
Amendment No. 376, again, would remove the word "solely" from the Bill If a person therefore had mixed motives, that would be a complete defence. It is a very difficult area to define how one absolves a person because, like the curate's egg, his motives are good in parts. I believe that the introduction into the legislation of mixed motives would present a lot of difficulties. I would find it hard to accept my right hon. Friend's amendment if he pressed it.
My right hon. Friend moved on to a third category of transaction. Here,


again, I cannot accept his amendment. I can, however, say something that I hope will be encouraging. We believe that, in the clear-cut situation where the decision can be justified separately from the inside information, there is already the defence available in clause 65(8), since the individual will not be realising the security with a view to making a profit or avoiding a loss by the use of the information. We consider that there is no need for the special provision in such cases. I hope that my right hon. Friend will feel that he does not need to press his amendment.

Sir Graham Page: I should like to deal with the last point first. Surely, if there is a profit that can be made when the mortgagee is exercising his power of sale, he is under a duty to the mortgagor to take that profit. He will, therefore, be selling with a view to making a profit. I cannot feel that he comes within the other paragraph about not making a profit. If there is a profit, he should take it in order to benefit his mortgagor. I cannot feel that my hon. Friend has been well advised on that point.
9.15 pm
On the main point of my amendment No. 399, I can only hope that the courts will be better convinced by my hon. Friend's argument than I am. We must remember that, if a director does deal in his own company's shares, he is not just running the risk of the deal being declared void or voidable: he is running the risk of criminal prosecution, of committing an offence. I would not dare deal in shares in a company of which I am a director as the clause stands.
My hon. Friend's argument may be perfectly right but some judges sometimes give strange judgments—although they may be perfectly right—and I can imagine that some would not accept his argument. I would not risk it. I would not sell any shares under the clause in a company of which I am a director and thus risk being prosecuted. I fear that many directors of companies will feel the same when they deal in their own shares in those companies.

Amendment negatived.

Amendments made: No. 107, page 79, line 20, leave out
'on a recognised stock exchange'.

No. 108, page 79, line 22, leave out so'.—[Mr. Parkinson.]

Mr. Parkinson: I beg to move amendment No. 109, in page 79, line 24, leave out from 'who' to end of line 29 and insert—

'(a) appeared to him to be an appropriate person from whom to seek such advice and
(b) did not appear to him to be prohibited by this section from dealing in those securities.'.
The Law Society of England and Wales has suggested to us that, as presently drafted, subsection (10)(b) might require a trustee to have some evidence that the adviser from whom he was seeking advice was not prohibited from dealing before he could obtain the benefit of the presumption. This would have the undesirable consequence that the trustees would need to ask the adviser for confirmation that he was not a prohibited person, which inquiry would almost inevitably suggest to the adviser that price-sensitive information was in existence in relation to the shares.
The amendment therefore makes it clear that what is necessary in this context is that the adviser should not appear to the trustee to be prohibited by the clause from dealing.

Amendment agreed to.

Clause 66

PROHIBITION ON ABUSE OF INFORMATION OBTAINED IN OFFICIAL CAPACITY

Amendments made: No. 110, in page 80, line 11, leave out from 'deal' to end of line 12 and insert
'in any such securities, knowing or having reasonable cause to believe that that other person would deal in them on a recognised stock exchange'.

No. 111, in page 80, line 19, at end insert 'other'.—[Mr. Parkinson.]

Mr. Parkinson: I beg to move amendment No. 112, in page 80, line 23, at end add—
'(5) An individual shall not, by reason only of having information relating to a particular transaction, be prohibited by any provision of this section from doing anything if he does that thing in order to facilitate the completion or carrying out of the transaction.'.
The purpose of this amendment is to provide in the case of clause 66, which relates to insider dealing by Crown


servants, the defence which is provided in clause 65(10) for insider dealing generally.

Mr. Anderson: As the Minister said, this amendment parallels clause 65(10), which is in the context of takeovers and provides that there is no offence when a person merely carries out or completes a transaction which he has already initiated after coming within the scope of the prohibition—that is, if he acquires securities before announcing his intention in a takeover bid. It is difficult to understand how the exemption, which is proper under clause 65, is applicable to a person who obtains information in an official capacity or from someone in an official capacity. It would be helpful if the Minister were to set out the relevance of the proposition to a Crown servant.

Mr. Parkinson: We are trying to cover the parallel to the commercial case involving Crown servants. For example, shares previously held by the Government might be disposed of. The Crown servant might have begun to be involved in a transaction when a sudden decision was taken of which he had no prior knowledge. In that case the Crown servant could be in the same position as the commercial person.

Amendment agreed to.

Clause 67

OFF-MARKET DEALS

Mr. Parkinson: I beg to move amendment No. 323, in page 80, line 24, leave out subsection (1) and insert—
'(1) Subject to section (International bonds) below sections 65 and 66 above shall apply in relation to—

(a) dealing otherwise than on a recognised stock exchange in the advertised securities of any company—

(i) through an off-market dealer who is making a market in those securities, in the knowledge that he is an off-market dealer, that he is making a market in those securities and that the securities are advertised securities; or
(ii) as an off-market dealer who is making a market in those securities or as an officer, employee or agent of such a dealer acting in the course of the dealer's business;
(b) counselling or procuring a person to deal in advertised securities in the knowledge or with reasonable cause to believe that he would deal in them as mentioned in paragraph (a) above;

(c) communicating any information in the knowledge or with reasonable cause to believe that it would be used for such dealing or for such counselling or procuring,
as they apply in relation to dealing in securities on a recognised stock exchange and to counselling or procuring or communicating any information in connection with such dealing.'.

Mr. Deputy Speaker: With this we may discuss Government amendment No. 113.

Mr. Parkinson: The purpose of the amendment is to introduce a new element—that of the market maker—into clause 67, as I explained in connection with new clause 23 last week.

Amendment agreed to.

Mr. Parkinson: I beg to move amendment No. 324, in page 80, line 44 at end add—
'(1A) An individual who, by reason of his having any information, is for the time being prohibited by any provision of section 65 or 66 above from dealing in any securities shall not—

(a) counsel or procure any other person to deal in those securities in the knowledge or with reasonable cause to believe that that person would deal in the securities outside Great Britain on any stock exchange other than a recognised stock exchange; or
(b) communicate that information to any other person in the knowledge or with reasonable cause to believe that that or some other person will make use of the information for the purpose of dealing or of counselling or procuring any other person to deal in the securities outside Great Britain on any stock exchange other than a recognised stock exchange.
Sections 65(8) and (11) and 66(5) shall have effect as if any reference therein to either of those sections included a reference to this subsection.'.
The amendment would make it an offence for an individual, prohibited from dealing under clauses 65 and 66, to counsel or procure a person to deal on a foreign stock exchange. It would also make it an offence to pass on relevant inside information when there is reasonable cause to believe that it would be used for dealing on a foreign stock exchange.

Amendment agreed to.

Amendment made: No. 113, in page 81, line 13, after second 'a insert 'recognised stock exchange or'.

Clause 69

INTERPRETATION OF PART V

Mr. Anderson: I beg to move amendment No. 116, in page 82, line 16 leave out 'specific'.

Mr. Deputy Speaker: With this we may discuss the following amendments:

No. 117, in page 82, line 16, after 'matters', insert 'specifically'.

No. 118, in page 82, leave out lines 16 to 19.

No. 119, in page 82, line 17, leave out', that is to say, is' and insert 'and'.

No. 382, in page 82, line 18, after 'nature', insert 'for example matters'.

No. 121, in page 82, line 18, leave out 'that company' and insert:
'all persons doing similar business'.

Mr. Anderson: We recognise the difficulty of defining with the right amount of clarity the offence which we are now discussing. We have commented about the difficulties that a judge will have trying to explain the offence of insider dealing to a jury. I was amused when the Minister said that this was a crystal clear piece of legislation. I draw his attention to the interpretation section of the Bill—clause 69(2)(a) which states that the unpublished price-sensitive information
relates to specific matters relating or of concern (directly or indirectly) to that company, that is to say, is not of a general nature relating or of concern to the company and".
That is what the Minister says is a crystal clear piece of legislation. We think that it is very vague and that there will be obvious difficulties of explanation. We have, therefore, tried our honest best to produce a definition which could be given to a jury with, we hope, some greater chances of comprehension than the definition which the Government have currently proposed.
Our new definition would read:
relates to matters specifically relating or of concern (directly or indirectly) to that company, and not of a general nature, for example matters relating or of concern to all persons doing similar business.
We do not claim that our amendment is perfect, but it is an effort to make the definition more simple, because without that how seriously can a judge direct a jury on the distinction between "specific"

and "general"? We therefore commend it to the Government.
We believe that our amended definition has the merit of being somewhat more elegant than that currently proposed by the Government.

Mr. Parkinson: I do not want to start receiving 200 letters about the crystal clarity of this legislation, so let me put it firmly on record that I was saying that when the Bill is reprinted with all the amendments incorporated in it the definition will be a great deal clearer than it is now. I make no greater claim than that.
I find myself at a disadvantage. I have here a four-page answer to the points that the hon. Member for Swansea, East (Mr. Anderson) has made, but we have debated these issues in Committee. While what he is proposing might or might not be more elegant—and I might have an argument with him about that one some other occasion—his amendments would totally destroy the definitions which have been built up for the benefit of this part of the Bill. Therefore, although we welcome his interest and his attempt to be helpful, were his amendments to be accepted they would totally undermine the definitions in the Bill, and we therefore cannot accept them.

Mr. Nicholas Baker: Will my hon. Friend clarify, in relation to specific transactions, what the Bill is designed to cover? Does it seek to cover not just takeover transactions, but transactions in the securities of the company which may be of another kind altogether? I know that my hon. Friend has received representations on the matter, and I seek to clarify the point.

Mr. Parkinson: The short answer to my hon. Friend is "Yes".

Amendment negatived.

Amendment made: No. 122, in page 82, line 29, leave out "those".—[Mr. Parkinson.]

Mr. Parkinson: I beg to move amendment No. 306, in page 82, line 36, at end add—
'"debenture" has the same meaning in relation to companies which were not incorporated under the 1948 Act as it has in relation to companies which were so incorporated;

Mr. Deputy Speaker: We shall consider at the same time Government amendment No. 307.

Mr. Parkinson: These amendments provide definitions of "share" and "debenture" in the case of foreign companies for the purposes of part V of the Bill.

Amendment agreed to.

Amendment made: No. 307, in page 83, line 11, at end add—
'"share" has the same meaning in relation to companies which were not incorporated under the 1948 Act as it has in relation to companies which were so incorporated;'.—[Mr. Parkinson.]

Clause 70

POWER OF COMPANY TO PROVIDE FOR EMPLOYEES ON CESSATION OR TRANSFER OF BUSINESS

Mr. Eyre: I beg to move amendment No. 270, in page 84, line 30, leave out from 'company' to end of line 31 and insert
'which are available for dividend; and'.
This is a simple drafting amendment which has the effect of making clause 70 entirely independent of part III, to which it is tied as at present drafted by the wording of subsection (6).

Amendment agreed to.

Clause 71

POWER OF COURT TO GRANT RELIEF AGAINST COMPANY WHERE MEMBERS UNFAIRLY PREJUDICED

Mr. Clinton Davis: I beg to move amendment No. 125, in page 85, line 1, after 'member', insert
'debenture holder, creditor, director or officer'.

Mr. Deputy Speaker: We shall consider at the same time the following amendments:

No. 126, in page 85, line 1, after 'member', insert
'or an employee or recognised trade union acting on behalf of an employee'.

No. 128, in page 85, line 5, after 'embers', insert
'debenture holders, creditors, directors or officers'.

No. 130, in page 85, line 16, after 'members', insert

'debenture holders, creditors, directors of officers'.

No. 131, in page 85, line 16, after 'members', insert 'or any employees'.

Mr. Davis: The new provision which we seek to import would be of some value, I suggest, in avoiding of reversing the restrictive interpretation which is currently placed on section 210 by the courts. In our view, the clause as drafted will of itself do nothing expressly to that effect.
The mischief which we seek to cure is that the conduct complained of has to affect members in their capacity as members, and that is why we wish to import this selection of persons—"debenture holders, creditors, directors or officers".
Although this is by no means decisive, some encouragement that the courts might take a less rigid view than was the case in the past was expressed by the House of Lords in in re Westbourne Galleries Limited, which was a case of winding up on the just and equitable ground. However, that was simply obiter dictum, and unless the Government are prepared to do something it would seem that the court would continue to hold that an order cannot be made unless the conduct or action is unfairly prejudicial to members qua members and not qua directors or creditors.
There is a good precedent for what we suggest in the Canadian Business Corporation Act 1975, section 234 (2) of which enables petitions to be brought in respect of conduct which
unfairly disregards the interests of any security holder, creditor, director or officer".
Our proposal is very much based on that precedent.
That deals with our amendment No. 125. I hope that the Government will accept it. I do not see that it could do any harm to their intentions. Indeed, it would reinforce them.
I turn now to amendment No. 126. We take the view that it would be right for clause 71 to encompass within the term "member" an employee to give the employee or recognised trade union acting on behalf of an employee the same sort of rights as are enjoyed by members. I need not rehearse the argument at length because we have debated the point substantially in the past. We believe that the Government were wrong to reject our view on that occasion, but there it is.
I recognise that the Government are not likely to accept amendment No. 126, but we hope that they will take a constructive view of the point that we make in amendment No. 125.

Mr. Eyre: The effect of the amendments would be to extend clause 71 from a clause which permits the court to provide relief when the interests of some part of the members of a company are being unfairly prejudiced to one which provides such relief when the interests of some part of the debenture holders, creditors, directors or officers or employees are being unfairly prejudiced.
The present clause follows closely from the recommendations of the Jenkins committee on company law in 1962, and is intended to remedy the deficiencies that have come to light in section 210 of the 1948 Act. The objective was to strengthen the position of minority shareholders, especially in a private company, to resist oppression by the majority. The problem faced by minorities was and is a consequence of the broad rule that it is the majority which controls the company. As a means of resolving legitimate differences between shareholders, it has obvious attractions, but it can, if unrestrained, be taken to extremes.
Section 210 was devised to deal with those extremes. It has not lived up to its expectations, and, therefore, we have clause 71. But this is an attempt to deal with the worst excesses of the rule that the majority should prevail among shareholders. The policy is to put the matter to the court, which means the companies court or any other courts with jurisdiction to wind up the company, and the court is given as wide a freedom as possible to decide on the merits of the case once it has established that there has been unfairly prejudicial conduct.
The amendments closely follow the provisions of section 234 of Canada's Business Corporation Act 1975 and will extend the jurisdiction to cases where debenture holders, creditors, directors, officers or indeed, employees, claim that the interests of some part of the group of people have been unfairly prejudiced. I have noted carefully what the hon. Gentleman has said about amendment No. 125, but the later amendment included the reference to employees.
provisions of section 234 of Canada's concede is unacceptable, is the hon. Gentleman prepared to go along in the same direction as the Canadia nstatute, which, as I understand it, has in no sense proved to be harmful? Indeed, it has been beneficial.

Mr. Eyre: I appreciate that, but I am not able to go along with the hon. Gentleman to that extent. I should like to explain why not, and also what we hope to do, because I think the hon. Gentleman will find it interesting.
Any such disputes would, therefore, be for the courts to decide at large. There is no clear indication of how the provisions would work. Within the narrow confines of disputes between shareholders, the companies court is given very wide powers to settle the dispute by making such orders as it thinks fit.
It is entirely a different matter to give to the companies court such a wide discretion when employees complain of conduct that is unfairly prejudicial to any employees. That is concerned with discrimination against a minority of employees in favour of the majority, as is the case with shareholders. Perhaps the hon. Gentleman will consider what the TUC and recognised trade unions would think about the prospects of employees who support unrecognised unions—

Mr. Clinton Davis: For the sake of time, I am prepared to concede the whole argument about employees. I merely want the hon. Gentleman to deal with amend No. 125.

Mr. Eyre: I shall try to relate more closely to that amendment. The hon. Gentleman will appreciate that it would not be possible to involve the court in so many of those cases.
I am aware that certain Canadian jurisdictions have adopted the broad approach embodied in the amendments. They represent a radical departure from the broad measure of agreement in this country which has prevailed on the strengthening of section 210. The Jenkins committee analysis has been accepted by successive Governments, and what is clause 71 was clause 65 in the previous Administration's Companies Bill in 1978. Indeed, the Opposition in another place added the present clause to the Bill.
There has been no public discussion of the merits of the amendments, and I doubt whether many people who consider themselves expert in this sphere are au fait with the Canadian legislation in theory and practice. As I have said, there appear to be strong arguments against the amendments. For those reasons, I must advise the House to reject amendment No. 125. I appreciate that the issues underlying the amendment merit further consideration and discussion. We should acknowledge a debt to the hon. Gentleman, especially for drawing on a wide knowledge of comparative company law, for bringing this matter before the House.
I undertake that the Government, as part of their consideration of legislative proposals for the companies Bill in the next Session, will consult on the merits of the proposals and discuss them with a wide range of interested parties. The hon. Gentleman will understand that I enter into no commitment about eventual conclusions. Clearly this is a matter where the divisions of opinion do not fall along party political lines. In the meanwhile, we shall seek to discover how the Canadian provisions are working in practice.
No doubt Labour Members will wish to contribute to the general discussion. I need hardly say that the agenda for discussion is not dictated by the Government. Labour Members are skilled and persistent in raising matters that they consider important.
In the light of the assurances that I have given, I hope that the hon. Gentleman will agree to seek to withdraw the amendment.

Mr. Clinton Davis: I am not satisfied with the rationale adduced by the Minister for rejecting the amendment. However, I am grateful to him for saying that he will consult widely. When he says that this is not a party political issue, I must stress that my party has intense feelings about it. However, we shall not press the amendment to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Eyre: I beg to move amendment No. 127, in page 85, line 3, after 'being', insert 'or have been'.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendment No. 129.

Mr. Eyre: The amendments ensure that a member of a company will be able to apply to the court for relief on the ground that the affairs of the company have been conducted in an unfairly prejudicial manner as well as when they are being so conducted.

Amendment agreed to.

Amendment made: No. 129, in page 85, line 15, after 'being' insert 'or have been'.—[Mr. Eyre.]

Mr. Clinton Davis: I beg to move amendment No. 135, in page 85, line 42, at end insert—
'4(A) An order under subsection 4(a) above may be made notwithstanding that the acts, omission or course of conduct in respect of which such civil proceedings are to be brought is or involves a breach of duty by a director which was or could be ratified by a general meeting of the company.'.

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 136, in page 86, line 17, at end insert—
'(7A) A petition and order may be made under this section in respect of any breach of duty by any director, manager or other officer of a company whether or not the company is in course of being wound up.'.
No. 137, in page 86, line 17, at end insert—
'(7A) An act, omission or course of conduct may be prejudicial within the meaning of subsection (1) above if, as a consequence of it, any director or other officer of the company acquires, directly or indirectly, unfair emoluments or other unfair advantages at the expense of the company.'.

Mr. Davis: The amendment featured, in a sense, in a previous debate when we were talking about breaches of fiduciary duties affecting employees. Certain breaches of fiduciary duty on the part of directors cannot, as I have said, be validated by ordinary resolution in general meeting. Such breaches fall into the category of abuse of power comparable to the misuse of a fiduciary position. There are a number of examples in the authorities, but I do not propose to take the time of the House by going through them. The overwhelming majority of breaches of fiduciary duty can be validated.
Perhaps the line is drawn between misappropriating the property of a company and merely making an incidental profit for which directors are liable to account to the company. Whatever the line, we feel that there is an anomaly in the law which needs to be cured by the provision that we propose in amendment No. 135, the effect of which would be to allow a prejudiced shareholder or creditor, or other individuals, to attack directors who are in breach of duty where directors control the voting, as they might do by proxies at general meetings. I hope that the Government will be able to meet us on that point.
9.45 pm
Amendment No. 136 would have the effect of remedying what we see as a defect in section 333 of the Companies Act 1948. That section applies where any promoter, director, manager or officer of a company, or the liquidator himself, has misapplied, or retained or become liable or accountable for, any money or property of the company or has been guilty of any misfeasance or breach of trust in relation to the company.
That has been held to cover breaches of fiduciary duties but not common law negligence. The authority for that is in re B. Johnson & Co. (Builders) Ltd., 1955, Chancery Division at page 634, which was a case in the Court of Appeal.
Furthermore, the Jenkins report recommended that for "breach of trust" in the section there should be substituted a reference to any breach of duty, thus affording a remedy for negligence as well. I draw paragraph 503(d) to the Minister's attention.
Amendment No. 137 also follows a recommendation of the Jenkins report in paragraph 205 and a recommendation of the more ancient Cohen report of 1943 at paragraphs 58 to 59. Jenkins thought that an action under section 210 might be appropriate where, for example, directors appointed themselves to paid posts with a company at excessive rates of remuneration, thereby depriving the complaining members of any dividend or adequate dividend on their shares, or where, for example, directors in exercise of their powers refused to register personal representatives in connection with shares that

devolved on them in that capacity, and were enabled thereby to force the personal representatives to sell shares to the directors at an inadequate price.
Those are some of the examples cited by Jenkins. Others are also cited.
The matter was considered in re Jermyn Street Turkish Baths Ltd. I cite that case because inevitably Conservative Members in their sweatier moments will be familiar with it.

Mr. John Smith: I am an esteemed member.

Mr. Clinton Davis: I am told by my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) that he is an esteemed member.
The two recommendations in the Jenkins report are worthy of reasonable consideration by the Government. They have been made over a long period, and I hope that the Minister can offer us some hope.

Mr. Eyre: On all three amendments I appreciate that the hon. Member for Hackney, Central (Mr. Davis) is seeking to make clear beyond doubt that clause 71 will deal satisfactorily with specific problems. We entirely agree that those specific cases need to come within the clause, but we differ on mechanics.
We believe that it is dangerous to add specific provisions to the clause. It will implicitly cast doubt on its generality. The proposal could be counter-productive. Cases falling just outside the amendments may be held to fall outside the clause.
I can develop a great number of detailed reasons why we resist the amendments, and I should be grateful if the hon. Gentleman does not press them.
Clause 71 in its present form has been long awaited. Will the hon. Gentleman agree to wait and see how the measures work in practice? We shall bear his thoughts in mind.

Mr. Clinton Davis: All I am asking is that the hon. Gentleman does what Ministers in trouble often do. Will he say that he will consult widely?

Mr. Eyre: Yes.

Amendment negatived.

Clause 72

TRADING UNDER MISLEADING NAME, ETC.

Mr. Eyre: I beg to move amendment No. 320, in page 87, line 5, after '108', insert '(1)(b) or (c)'.

Mr. Deputy Speaker: With this we shall take Government amendment No. 321.

Mr. Eyre: The amendment extends the time allowed for public companies to make the changeover from their old to their new name from one year to three years for the purposes of section 108(1)(a) of the 1948 Act. The provision is concerned with the display of a company's name outside its place of business.

Amendment agreed to.

Amendment made: No. 321, in page 87, line 7, after 're-registration', insert—
'section 108(1)(a) of the 1948 Act or'.[Mr. Eyre.]

Clause 74

ALTERNATIVES AND WELSH EQUIVALENTS OF STATUTORY DESIGNATIONS

Mr. Eyre: I beg to move amendment No. 322, in page 87, line 38, leave out from 'and' to end of line 41 and insert—
'any reference in those Acts to the name of a company or to the inclusion of any of those words in the name of a company shall include a reference to the name of the company including (in place of any of the words so specified) the appropriate alternative, or to the inclusion of the appropriate alternative, as the case may be.'.
This amendment is necessary to clarify the provision. It concerns an alternative to the use of statutory designations. The amendment makes clear that a company can choose to register either with its designation in full—that is, "public limited company"—or with an abbreviation. If it decides to register with the full designation it will still be able to use the alternative designation as an abbreviation in its day-to-day business. I hope that the House will welcome this helpful amendment.

Amendment agreed to.

Clause 75

QUALIFICATIONS OF COMPANY SECRETARIES

Sir Graham Page: I beg to move amendment No. 344, in page 88, leave out lines 17 to 20 and insert
to take all reasonable steps to secure that the secretary or each joint secretary of the company is a person who appears to them to have the requisite knowledge and experience to discharge the functions of secretary of the company and who'.

Mr. Deputy Speaker: With this we may take the following amendments: No. 385, in page 88, line 19 leave out 'and experience'.

No. 386, in line 20 leave out from 'secretary' to end of line 33.

No. 345, in line 21, leave out from
'secretary' to end of line 22 and insert 'or assistant or deputy secretary of the company'.

No. 346, in line 25, leave out 'the appointment has' and insert 'his appointment as secretary'.

No. 347, in line 26, leave out from 'a' to end of line 33 and insert
'company other than a private company; or
(c) is a member of any of the bodies specified in subsection (2) below; or
(d) is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom; or
(e) is a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging those functions.
(2) The bodies referred to in subsection (1)(c) above are: —

(a) the Institute of Chartered Accountants in England and Wales;
(b) the Institute of Chartered Accountants of Scotland;
(c) the Association of Certified Accountants;
(d) the Institute of Chartered Accountants in Ireland;
(e) the Institute of Chartered Secretaries and Administrators;
(f) the Institute of Cost and Management Accountants;
(g) the Chartered Institute of Public Finance and Accountancy.'.

No. 138, in line 31, after Ireland insert
'or of the Association of Certified Accountants'.

No. 139, in line 31, after 'Ireland' insert
'or of the Institute of Cost and Management Accountants'.

No. 140, in line 31, after 'Ireland' insert
'or the Chartered Insurance Institute'.

No. 141, in line 31, after 'Ireland', insert
'or of the British Association of Accountants and Auditors'.

No. 142, in line 31, after 'Ireland', insert
'or of the Association of International Accountants'.

No. 143, in line 31, after 'Ireland', insert
'or of the Association of Authorised Public Accountants'.

No. 144, in line 31, after 'Ireland' insert
'or (in the case of an insurance company) of the Chartered Insurance Institute'.

No. 145, in page 88, line 31, at end insert—

(i) is a member of the Association of Certified Accountants, or
(ii) is a member of the Institute of Cost and Management Accountants, or
(iii) is a member of the Chartered Institute of Public Finance and Accountancy.'.
(iv) is a member of the Association of International Accountants.

Sir G. Page: In Committee the principle that the secretary to a public company should be qualified for that purpose was accepted. We pile more and more obligations on the directors in every Companies Act. The directors must necessarily look to the secretary for guidance. The situation was burdensome before the Government introduced the present Bill. This Bill will give the directors more duties. They will need more advice by a qualified person. A director will need to consider the interests of employees, limitations on contracts with directors, loans to directors, and the disclosure of directors' interests. Directors may also seek guidance on insider dealings. All of those issues require expert knowledge.
I shall not argue the case fully, as the principle that secretaries should be qualified was accepted in Committee. Of course, the clause required consideration

by those involved. I am glad that my hon. Friend the Minister had consultations with those involved. As a result, my amendments stand on the Amendment Paper. I shall not discuss amendments Nos. 138 to 144 as they have been overtaken by amendment No. 347.
Amendment No. 344 is consequential on amendment No. 346. It is little more than a redrafting of the first few lines of the clause. The first few lines make two assumptions that are incorrect. The first assumption is that the secretary is always appointed by the directors. Perhaps there are provisions in the articles for the secretary to be appointed by someone else. The revised wording provided in amendment No. 344 would take that into account.
Secondly, as originally drafted, consideration was not given to the fact that the secretary might become disqualified. A secretary might have his membership of an institution withdrawn. One should consider whether the secretary is qualified at all times, not merely when he is appointed. Amendment No. 345 restricts paragraph (a) to certain specific officers —the secretary, the assistant secretary and the deputy secretary—because in the larger amendment No. 347 the matter is picked up in paragraph (e) where other officers are concerned.
Amendment No. 347 deals with the question of the qualifications and with those listed in subsection (2). Those are the bodies which the House would consider without question as they provide a natural channel for an individual equipping himself for a career as a secretary. The new paragraph (c) in subsection (1) introduces that list in subsection (2). Paragraph (d) of the new subsection (1) retains within that list solicitors and barristers who were in the clause accepted in Committee.
For the moment I shall skip new subsection (1)(e) and go straight to the list in subsection (2). The House will see that paragraphs (c), (f) and (g) are additions to that list so far as the list was accepted in Committee. Paragraphs (a), (b), (d) and (e) were accepted in Committee and the list now covers those who are already accepted in the Companies Acts as qualified as auditors for a company, and it also covers those who belong to a body known as the Consultative Committee of


Accountancy Bodies, which includes the recognised accountancy bodies.
I come back to new subsection (1) (e), which provides that the following shall be qualified:
a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging those functions.
On consultation, I have found that there were officers who were a little superior to secretaries but who undoubtedly had the qualifications front experience in many companies. There are officers referred to as "directors-general", "chief administrators" or "chief executives". It may well be that the directors would think that anyone with experience in such a position was well qualified to act as secretary. That was one point that we wanted to cover in paragraph (e).
Secondly, there are specialist institutions such as those for insurance or banking where obviously those who have qualified or who are members of those institutes would be fit and proper persons to act as secretaries for an insurance company or a banking company. Those are the sort of cases that it was obviously necessary to cover in this clause. With this list, which I hope the House will approve, we include a body which concentrates on the education of secretaries, namely, the Institute of Chartered Secretaries and Administrators. I declare an interest in that I am an honorary fellow of that body. That is the main body for secretaries, and I hope that it will organise a common examination and a common training programme with the other institutions that I have mentioned. Until that applies universally, it is necessary to allow those who are experienced in secretarial business to be accepted as qualified.
Whenever the House has passed legislation saying that those practising a certain profession or in a certain business must in future be qualified or not practise in that business, it has always recognised that there will be, at that point, those who have not reached that qualification but who have good experience in that position. One cannot exclude them at that stage. Eventually I hope that there will be universal—

It being Ten o'clock, further consideration of the Bill stood adjourned.

Ordered,
That, at this day's sitting, the Companies Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Mather.]

Bill, as amended (in the Standing Committee), further considered.

Sir G. Page: I hope that in due course all secretaries will become qualified by examination as well as by experience, so that the directors will not have any doubt that the person they are appointing is properly qualified.

I hope that the House will accept the amendments.

Mr. Martin Stevens: I support the amendments in the name of my right hon. Friend the Member for Crosby (Sir G. Page). On amendment No. 347, it is true that presently many bodies are seeking to present themselves as holding professional status. The Institute of Directors is seeking to be regarded as an essential body to which all persons wishing to serve as directors of companies must belong. Over the coming years, the Institute of Directors will try to apply to its members a growing range of professional requirements which would at the end of the day, justify members of that institute regarding themselves as professionals.
In the list of bodies mentioned in the amendment there are some that are truly professional, in the sense that they offer a course of study followed by an examination, the passing of which is an essential prerequisite to acting as a professional person, and in which bodies there is a self-regulating code of practice applied to ensure proper professional behaviour. There is no such requirement in many of the other organisations listed.
I hope that my hon. Friend the Minister for Trade, will have regard, over the years, to those factors so that organisations that are fully professional will be added to the list, and those which fail to become fully professional may be considered with a sharper scrutiny.
The amendment clearly meets a requirement in the Bill. It is a more liberal statement than that made in the revised version of the Bill. I commend it to the House.

Mr. Clinton Davis: I recall that on the evening that the right hon. Member for


Crosby (Sir G. Page) managed, with some difficulty, to persuade the Government to accept his proposal, he was feted and regaled by the Institute of Chartered Secretaries and Administrators at a dinner that he will remember. However, the mighty victory has been affected by some of the amendments that provide, in effect, that one must be qualified unless one is not qualified.
If we are to press for a list, I ask the Minister to consider the Association of International Accountants, which is specified in amendment No. 145. I know that the Department of Trade has not regarded the AIA's examinations as being adequate, but I understand that they have now been endorsed by distinguished moderators of the Department's choosing, and that may make a difference.
The association was concerned chiefly with Commonwealth accountants in places such as Nigeria who looked to this country to establish their standards through the AIA. The association has 27 principal examiners and, in addition to examining in English law, conducts examinations in taxation and company law, in the local law of 10 other countries. It has impartial examination standards and hopes that the Minister will look upon it with some favour.
I am surprised that the Minister has not sought powers to add to the list by statutory instrument. That would be more helpful than including the list in primary legislation, but we are stuck with the legislation, as is the Minister.

Mr. Ben Ford: I support my hon. Friend the Member for Hackney, Central (Mr. Davis). For a number of years I have sought to excite the attention of successive Ministers to the claims of the Association of International accountants. The association has now brought its examinations up to the standard of other recognised bodies.
Clause 75 is unduly restrictive, because there is no provision for the Minister to recognise bodies other than those included in the list. I hope that the Government will make a concession and will accept the plea of my hon. Friend.

Mr. Nicholas Baker: I have made known my opposition to the clause and the amendments. I do so with some

hesitation, because the amendments are in the name of my right hon. Friend the Member for Crosby (Sir G. Page), but I did not come here to implement another restrictive practice.
I was surprised to see that in Committee the hon. Member for Hackney, Central (Mr. Davis), who had opposed the suggestion for years when in office, achieved a conversion in two and a half hours and joined an unholy alliance with some of my right hon. Friends to support the clause, which is a restrictive practice and unnecessary.
One of the faults of the clause is that it is based on a misapprehension of the job of a secretary of a public company. Secretaries are not central to the management of companies, and public companies are a much wider group of bodies than people credit, especially in the House.
Because public companies are so wide, the requirements of a secretary are equally wide and the attempt to produce a list of suitably qualified people who can do the job is, on the basis of the unamended clause, too restrictive and, on the basis of the clause as amended, so wide as to make it meaningless. I believe that one of the intentions behind the proposal was that secretaries should be qualified to protect shareholders and companies and their directors. I have no evidence that secretaries of public companies have been responsible for major scandals or instrumental in shareholders being defrauded. The secretary is a special kind of employee. His job varies according to the needs of the company.
I carried out some soundings between the Committee stage and this stage of the Bill. I have the views of the Law Society and those of the Consultative Committee of Accountancy Bodies, which includes most of those mentioned in subsection (2) of amendment No. 347. Their view is that the clause—this, it seems to me, restrictive practice—is unnecessary in the public interest. I agree with that view.
The proposed subsection (e) in the amendment refers to
a person who, by virtue of his holding or having held any other position or his being a member of any other body".
I do not know what the phrase "any other position" means. It seems to mean what the directors of the company would


like it to mean. In other words, it drives a coach and horses through the whole clause, which, I agree, is better than the clause in its previous incarnation. I do not think, however, that we help companies, the people who have to work in them, or those who advise them by introducing legislation that is not clear. I quarrel not only with the clause but with the amendments.
10.15 pm
I hope that my right hon. and hon. Friends, aided perhaps by the hon. Member for Hackney, Central will reconsider the support they gave this clause in Committee and change their minds even at this late hour.

Mr. Eyre: I emphasise that this clause applies only to public companies. There has been some misunderstanding in the past. As my right hon. Friend the Member for Crosby (Sir G. Page) has indicated, clause 75 was introduced into the Bill in Committee, not least because of my right hon. Friend's gift of persuasion and persistence. While such a clause was not originally proposed by the Government, we accept that there is a strong body of opinion both in the House and outside that considers that the importance of the office of company secretary and hence of the appointment made to the office justifies a clause of this kind in our companies legislation.
We made clear, however, at that stage that amendments would be needed at a later stage to remedy the deficiencies in the drafting of the clause.
I am now glad to commend to the House amendments Nos. 344 to 347 inclusive in the name of my right hon. Friend the Member for Crosby and my hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) as remedying these deficiencies. I hope that the other amendments will not be pressed. I have noted the strong feelings expressed by my hon. Friend the Member for Dorset, North (Mr. Baker) and also the detailed proposals put forward by my hon. Friend the Member for Fulham (Mr. Stevens), both of whom gave valuable service in Committee.
It was generally recognised in Committee that the clause was narrowly drafted. I appreciate the points made by the hon. Member for Hackney, Central (Mr. Davis) and also by the hon.

Member for Bradford, North (Mr. Ford) relating to the Association of International Accountants. It simply is not practicable or wise to think in terms of remedying the imperfection by adding to a list. It is generally recognised that there are certain bodies of which most company secretaries are members. These are set out in amendment No. 347. But I know that there are many other bodies, in accountancy and in insurance, banking and the actuarial field, for example, to which company secretaries belong. There are also company secretaries from the EEC or the Commonwealth who may not belong to one of our institutes but whom directors would have no qualms in appointing. There are bodies corporate that act as secretaries.
If we were to seek to arrive at a comprehensive list of bodies to whom company secretaries might belong, we would take up literally pages of the statute book. It would be disastrous if this House carried a clause which deprived eminently well-qualified, conscientious and competent people, in whom the directors would have confidence, of the opportunity to fulfil this important position in companies. In my view, amendments Nos. 344 to 347 strike the right balance between duty and flexibility.

Amendment agreed to.

Amendments made: No. 345, in page 88, line 21, leave out from 'secretary' to end of line 22 and insert
'or assistant or deputy secretary of the company'.

No. 346, in page 88, line 25, leave out 'the appointment has' and insert 'his appointment as secretary'.

No. 347, in page 88, line 26, leave out from 'a' to end of line 33 and insert:
'company other than a private company; or
(c) is a member of any of the bodies specified in subsection (2) below; or
(d) is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom; or
(e) is a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging those functions.
(2) The bodies referred to in subsection (1)(c) above are: —

(a) the Institute of Chartered Accountants in England and Wales;


(b) the Institute of Chartered Accountants of Scotland;
(c) the Association of Certified Accountants;
(d) the Institute of Chartered Accountants in Ireland;

(e) the Institute of Chartered Secretaries and Administrators
(f) the Institute of Cost and Management Accountants;
(g) the Chartered Institute of Public Finance and Accountancy.'.—[Sir Graham Page.]

Clause 80

THE AUTHORISED MINIMUM

Amendment made: No. 146, in page 90, line 29, leave out "issued" and insert "allotted".—[Mr. Parkinson.]

Clause 82

INTERPRETATION

Amendments made: No. 147, in page 92, line 2 after "shares", insert "or debentures".

No. 148, in page 92, line 17, leave out from "cash" to end of line 18 and insert "(including foreign currency)".

No. 150, in page 92, line 42, leave out "this Act" and insert "the Companies Acts".

No. 151, in page 93, line 10, leave out "this Act" and insert "the Companies Acts".

No. 152, in page 93, line 11, after "17", insert "of this Act".

No. 153, in page 93, line 15, at end add
and for the purposes of determining whether a share is or is to be allotted for cash or paid up in cash, 'cash' includes foreign currency".

No. 335, in page 93, line 17, after "sheet", insert
or to a profit and loss account".

No. 285, in page 93, line 21, after "transfer", insert "or acquisition".—[Mr. Parkinson.]

Clause 85

SHORT TITLE, CITATION, COMMENCEMENT, AND EXTENT

Amendment made: No. 272, in page 94, line 41, leave out from "purposes" to end of line 43 and insert
of this Act or for different purposes of the same provision; and references in this Act to the appointed day shall be construed accordingly".—[Mr. Parkinson.]

Schedule 2

INCREASE OF PENALTIES AND CHANGE OF MODE OR TRIAL

Amendment proposed: No. 158, in page 98, line 8, leave out "£25" and insert "£10".—[Mr. Eyre.]

Mr. Deputy Speaker (Mr. Bernard Weatherill): It will be convenient to discuss at the same time Government amendments Nos. 159 to 221.

Mr. Clinton Davis: This group of amendments would reduce substantially the penalties for defaulting companies. It is in sharp contrast to the vendetta that this Government mount against so-called "scroungers" of social security that in this sort of matter they themselves introduced these penalties in another place but have now decided substantially to amend them. They have one approach for defaulting companies and quite another for people on the slagheap of despair.

Mr. Eyre: This is not a time for spurious indignation. I do not believe that the hon. Member for Hackney, Central (Mr. Davis) is right. There is a technical reason for the amendments, with one exception. The old penalties were set out as a result of the mistaken idea that section 3 of the Criminal Penalties Act 1967 applied to offences of this type. The amendments correct that mistaken idea. The new mode of trial and penalty is set out in schedule 4, which does not have the effect which the hon. Member for Hackney, Central believes it to have.

Amendment agreed to.

Amendments made: No. 159, in page 98, line 14, leave out "£25" and insert "£5".

No. 160, in page 98, line 20, leave out "£25" and insert "£5".

No. 161, in page 99, line 25, leave out "£25" and insert "£5".

No. 162, in page 101, line 16, leave out "£25" and insert "£5".

No. 163, in page 101, line 22, leave out "£25" and insert "£5".

No. 164, in page 102, line 21, leave out "£25" and insert "£5".

No. 165, in page 102, line 27, leave out "£25" and insert "£5".

No. 166, in page 103, line 6, leave out "£25" and insert "£5".

No. 167, in page 103, line 28, leave out "£25" and insert "£2".

No. 168, in page 104, line 27, leave out "£25" and insert "£5".

No. 169, in page 105, line 13, leave out "£25" and insert "£2".

No. 170, in page 106, line 12, out "£25" and insert "£2".

No. 171, in page 106, line 24, out "£25" and insert "£5".

No. 172, in page 107, out "£25" and insert "£5".

No. 173, in page 107, out "£25" and insert "£5".

No. 174, in page 107, line 25, out "£25" and insert "£2".

No. 175, in page 107, line 30, out "£25" and insert "£5".

No. 176, in page 108, line 6, out "£25" and insert "£5".

No. 177, in page 108, line 12, leave out "£25" and insert "£5".

No. 178, in page 108, line 18, leave out "£25" and insert "£5".

No. 179, in page 108, line 24, leave out "£25" and insert "£5".

No. 180, in page 109, line 16, leave out "£25" and insert "£2".

No. 181, in page 110, line 6, leave out "£25" and insert "£2".

No. 182, in page 110, line 17, leave out "£25" and insert "£5".

No. 183, in page 110, line 25, leave out "£25" and insert "£2".

No. 184, in page 111, line 16, leave out "£25" and insert "£5".

No. 185, in page 111, column 3, leave out lines 24 to 28 and insert—
'On conviction on indictment, a term of imprisonment not exceeding six months or a fine or both.'.

No. 186, in page 112, column 3, leave out lines 5 to 9 and insert—
'On conviction on indictment, a term of imprisonment not exceeding six months or a fine or both.'.

No. 187, in page 112, line 16, leave out '£25' and insert '£5'.

No. 188, in page 112, line 27, leave out '£25' and insert '£5'.

No. 189, in page 113, line 21, leave out '£25' and insert '£5'.

No. 190, in page 114, line 23, leave out '£25' and insert '£5'.

No. 191, in page 115, line 6, leave out '£25' and insert '£10'.

No. 192, in page 115, column 3, leave out lines 24 to 28 and insert—

'On conviction on indictment, a term of imprisonment not exceeding six months or a fine or both.'.

No. 193, in page 116, line 12, leave out '£25' and insert '£5'.

No. 194, in page 116, line 18, leave out '£25' and insert '£5'.

No. 195, in page 117, line 9, leave out '£25' and insert '£5'.

No. 196, in page 117, line 15, leave out '£25' and insert '£5'.

No. 197, in page 117, line 24, leave out '£25' and insert '£5'.

No. 198, in page 120, line 24, leave out '£25' and insert '£5'.

No. 199, in page 121, line 9, leave out '£25' and insert '£5'.

No. 200, in page 121, line 15, leave out '£25' and insert '£10'.

No. 201, in page 121, line 21, leave out '£25' and insert '£5'.

No. 202, in page 122, line 13, leave out '£25' and insert '£5'.

No. 203, in page 123, line 6, leave out '£25' and insert '£5'.

No. 204, in page 123, line 13, leave out '£25' and insert '£5'.

No. 205, in page 123, line 18, leave out '£25' and insert '£5'.

No. 206, in page 123, line 25, leave out '£25' and insert '£5'.

No. 207, in page 124, line 6, leave out '£25' and insert '£5'.

No. 208, in page 125, line 12, leave out '£25' and insert '£5'.

No. 209, in page 125, line 18, leave out '£25' and insert '£5'.

No. 210, in page 126, line 12, leave out '£25' and insert '£5'.

No. 211, in page 126, line 19, leave out '£25' and insert '£5'.

No. 212, in page 127, line 19, leave out '£25' and insert '£5'.

No. 213, in page 127, line 23, leave out '£25' and insert '£5'.

No. 214, in page 129, line 17, leave out '£25' and insert '£5'.

No. 215, in page 129, line 26, column 4, leave out paragraph (a).

No. 216, in page 130, line 27, column 3, leave out from 'continues' to end of line 29.

No. 217, in page 131, line 6, leave out '£25' and insert '£5'.

No. 218, in page 131, line 17, column 3, leave out from 'continues' to end of line 19.

No. 219, in page 131, line 25, leave out '£25' and insert '£5'.

No. 220, in page 132, line 8, leave out '£25' and insert '£5'.

No. 221, in page 132, line 21, column 3, leave out from 'continues' to end of line 23.—[Mr. Eyre.]

Mr. John Smith: The Opposition are happy not to move the rest of their amendments, and we suggest that the Government propose their amendments formally.

Schedule 3

MINOR AND CONSEQUENTIAL AMENDMENTS

Amendments made: No. 232, in page 134, line 27, at end add—
'9A. In section 54 (prohibition on company providing financial assistance for purchase of own shares, etc.)—
(a) the following paragraph shall be substituted for paragraph (b) of subsection (1)—
(b) the provision by a company in accordance with a n employee share scheme (within the meaning of the Companies Act 1980) of money for the purchase of, or subscription for, fully-paid shares in the company or its holding company by the trustees of the scheme;";
(b) after subsection (1) there shall be inserted the following subsections—
(1A) The proviso to the foregoing subsection shall authorise a public company to give financial assistance to any person only if the company's net assets are not thereby reduced or, to the extent that those assets are thereby reduced, if the financial assistance is provided out of profits which are available for dividend.
(1B) In this section, "net assets" in relation to any company, means the aggregate of that company's assets less the aggregate of its liabilities; and "liabilities" include any provision (within the meaning of Schedule 8 to this Act) except to the extent that that provision is taken into account in calculating the value of any asset to the company.".'.

No. 222, in page 134, line 35, leave out from 'any' to end of line 38 and insert member of a relevant class;'.

No. 223, in page 134, line 45, leave out from 'of' to 'or' in line 1 on page 135 and insert
'a member of a relevant class'.

No. 224, in page 135, line 3, after 'shares', insert 'or debentures'.

No. 225, in page 135, line 9, leave out 'and'.

No. 308, in page 135, line 12, leave out 'under the age of 18' and insert
'and their descendants and any trustee (acting in his capacity as such) of a trust the principal beneficiary of which is that person or any of those relatives.'.

No. 227, in page 135, line 12, at end insert
'and "member of a relevant class" means an existing member of the company making the offer or invitation, or an existing employee of that company, or a member of the family of such a member or employee, or an existing debenture holder.'.

No. 229, in page 135, line 12, at end add
'10A. In section 56(2) (application of share premium account in paying up bonus shares, etc.) for the word "issued" there shall be substituted the word "allotted".'.

No. 230, in page 135, line 16, at end add
'11A. In section 58(5) (application of capital reserve redemption in paying up bonus shares) for the word "issued" there shall be substituted the word "allotted".'.

No. 253, in page 135, line 34, after 'Act)", insert

'(a) for the words "this Act" there shall be substituted the words "the Companies Acts 1948 to 1980"; and
(b)'.

No. 254, in page 135, line 43, after 'Act)', insert—

'(a) after the word "Act" there shall be inserted the words "and with the other requirements of the Companies Acts 1945 to 1980 as to the matters to be stated in group accounts"; and
(b)'.

No. 231, in page 137, line 8, at end add—
'22A. In section 205(b) (exclusion of prohibition on indemnifying officers of company against liabilities) after the words "this Act" there shall be inserted the words "or section 36 of the Companies Act 1980".'.

No. 336, in page 139, line 5, at end add—
(8) In the proviso to regulation 128 (power to apply reserve funds in paying up bonus shares) for the word "issued" there shall be substituted the word "allotted".

(9) The following regulation is added after regulation 128:
128A. The company in general meeting may on the recommendation of the directors resolve that it is desirable to capitalise any part of the amount for the time being standing to the credit of any of the company's reserve accounts or to the credit of the profit and loss account which is not available for distribution by applying such sum in paying up in full unissued shares to be allotted as fully paid bonus shares to those members of the company who would have been entitled to that sum if it were distributed by way of dividend (and in the same proportions), and the directors shall give effect to such resolution.".

(10) In regulation 129 (duties of directors on resolutions under regulation 128) for the words from the beginning to "have been passed" there shall be substituted the words "Whenever a resolution is passed in pursuance of regulation 128 or 128A above.".'

No. 234, in page 139, line 25, leave out from 'a' to first 'or' in line 29 and insert
'public company, other than an old public company within the meaning of the Companies Act 1980 (the "1980 Act") are required by the company by forfeiture or surrender in lieu of forfeiture or in pursuance of section 35(1A) of the 1980 Act or are acquired by another person in circumstances where paragraph (b) or (c) of section 37(1) of the 1980 Act applies'.

No. 235, in page 139, line 31, leave out 'the Companies Act 1979' and insert 'the 1980 Act'.

No. 236, in page 139, line 33, leave out 'such a person' and insert
'another person in such circumstances'.

No. 237, in page 139, line 37, leave out 'such a person' and insert
'another person in such circumstances'.

No. 238, in page 139, line 39, after 'company', insert 'or that other person'

No. 239, in page 139, line 41, leave out 'such a person' and insert
'another person in such circumstances'.

No. 240, in page 139, line 43, after 'of', insert
'by the company or that other person'.

No. 241, in page 140, line 4, leave out 'such a person' and insert
'the person who acquired them in such circumstances'.

No. 333, in page 142, line 7, leave out
'certified as such under section 41(7)'
and insert
'within the meaning of Part III'.—[Mr. Eyre.]

Schedule 4

REPEALS

Amendments made: No. 250, in page 143, line 35, column 3, at end add—
'In section 198, in subsection (1) the words from "and of" to the end, and in subsection (3), paragraph (a) and in paragraph (b) the words "and the last foregoing section".'.

No. 247, in page 144, line 33, column 3, at end add—'Section 26(8)(a)'.

No. 255, in page 144, line 45, column 3, at end add—
'In Schedule 4, the entry relating to section 149(6) of the Companies Act 1948.'.—[Mr. Eyre.]

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed, with amendments.

ROAD ACCIDENTS (PAYMENTS FOR TREATMENT)

Mr. Roland Moyle: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Road Traffic Accidents (Payments for Treatment) (England and Wales) Order 1980 (S.I., 1980, No. 111), dated 31st January 1980, a copy of which was laid before this House on 8th February, be annulled.
The charges were first imposed in 1936 under the Road Traffic Act before the introduction of the National Health Service. Of course the idea of charges then conformed with thinking in the 1930s. They were a substantial way of guaranteeing that doctors, nurses and other health professionals who tended road accident injuries were paid. By some unexplained legislative error and process, when the National Health Service was created in 1946 these charges escaped abolition and have staggered on in an anaemic and weak condition over the intervening years. Occasionally they have been adjusted upwards, but there is a constant temptation for Governments to raise them whenever the going gets a bit rough.
What does the order do? It says that where someone has to undergo in-patient treatment, from the date of operation or the order whereas the present charge is a maximum of £200 that shall be increased to £1,250. That is an increase of about 525 per cent. When it comes to outpatient treatment, 'whereas the maximum charge at present is £20, from the date of operation of the order the maximum charge will increase to £125, which is a similar percentage increase. If emergency treatment has to be provided at the location of the accident the charge at present is £1·25. After the date of operation of the order that will increase to £6·75, which is an increase of similar magnitude.
According to an answer given to me by the Minister for Health, I understand that the amount to be collected in charges in the financial year 1978–79 increases to £1.4 million. Although when that information was being sought no answer could be given, the Royal Automobile Club estimates that there is a collection cost of about £600,000 so that the balance earned by the Government at present is about £800,000. One wonders why the alternative course of abolishing charges altogether was not followed.
These are substantial increases. In their own small way they will add to the inflationary spiral. The Government's calculations seem to vary between an extra £1·8 million and £3 million gathered. My own calculations are that if the increase is to be about 500 per cent. the amount of money gathered should rise by about the same percentage and that therefore about £6 million to £7 million will be gathered because of the new level of charges.
I say advisedly that the inflationary spiral will be given an added twist because the insurance companies, which in effect pay these charges, will seek to recoup the added cost from the motorist by increasing premiums. That will be one more cost for the average motorist and one more calculation for him to make when considering his next pay or salary claim. That will also have an impact on inflation. We have the Government saying with one voice that they want to reduce inflation, and, as on so many other occasions, acting in a way which adds to the inflationary spiral.
There is no way in which an innocent party can escape these charges, if there are guilty and innocent parties in accidents. All motor insurance holders—by law that means everybody who drives a motor car—will have to pay the increased premiums whether they are potentially guilty or innocent parties in any road accident. As we all know, guilt or innocence will have to be determined at law and that is far from being a tidy arrangement, as anyone who has been involved in the process knows.
These charges are totally anomalous. By this legislative freak, road accidents only are covered. No other form of accident is dealt with in this way. If a person breaks his arm in a road accident he has to pay charges. If he breaks his arm by falling downstairs at home he does not have to pay. Accidents at work are not covered by this process. A man who deliberately sets out to drink or smoke himself to death, no matter what burden he throws on the NHS, is not covered by this process. No other form of accident—including aircraft and shipping accidents—is covered by this sort of arrangement. Road accidents are covered only because they were forgotten when the original NHS legislation was passed.
There can be no disincentive effect in the charges. I have yet to meet someone who volunteered to take part in a road accident. Surely the Government are not arguing that the charges have to be increased in order to deter that no doubt large section of the population that enjoys throwing itself under the wheels of passing motor cars purely out of pleasure, and to restrain its unnatural delight in these vices.
Alone and unsupported the arrangement breaches the principle of a Health Service which is free at the point of use, and that is the essential principle towards which we in the Labour Party wish to work. This is one of a group of charges that we inherited in 1974 which we were leaving to the processes of inflation to erode to the point at which we could abolish them happily and painlessly. Increasing these charges is in direct opposition to the policy that we wished to see followed.
Another powerful argument has come forward for the abolition of these charges. It is our knowledge that the Conservatives would like to proceed to a Health


Service based on an insurance principle. We know that a study has already been initiated by the Secretary of State. Ideally, the form of charge we are considering this evening indicates the way in which the Government would like to see the NHS funded. For that reason, if for no other, we feel that we should record our total opposition to the order, and I shall therefore be asking my right hon. and hon. Friends to vote against the order and in conformity with the prayer.

Mr. Roger Moate: I congratulate the right hon. Member for Lewisham, East (Mr. Moyle) on ably building a case out of nothing. The order is simply an uprating of the figures specified in the parent legislation. We have before us a Government proposition that the sum of £200 shall be increased to £1,250 and that £20 shall be increased to £125. I understand that the increases are simply to allow for the effect of inflation.
The right hon. Gentleman made a plausible and effective case to show that the Labour Party was proposing to allow the existing sums to wither on the bough so that they could be abolished. The whole thing, Labour Members believe, was a mistake. The fact that it was a mistake that persisted through year after year of Labour government is carefully forgotten.
The Minister has quite rightly come forward with a proposition to remedy the situation. It seems to me eminently reasonable that we should update the sums to amounts that are appropriate to this day and age.
However, the right hon. Member for Lewisham, East gave the game away when he said that the principle at stake is that the NHS should be free at the point of use. That is his argument, and he forgets about prescription charges which the Labour Government increased year after year.

Mr. Moyle: The hon. Gentleman must know that that is totally untrue. We did not increase prescription charges the whole time we were in government.

Mr. Moate: The right bon. Gentleman's memory is at fault, I think.

Mr. Moyle: No.

Mr. Moate: Perhaps I am mixing up my Labour Administrations, but I think that the right hon. Gentleman will find that Labour Administrations have increased prescription charges. We can check on that afterwards.

Mr. Stanley Orme: Not in the last five years.

Mr. Moate: The right hon. Gentleman is speaking of the previous Labour Government, but they at least maintained prescription charges, so that nothing was free at the point of service under the National Health Service. Of course, Labour Governments have charged. They have increased optical charges and other charges.
The right hon. Member for Lewisham, East should be concerned with the quality of service which the public receive. Is he not concerned with the amount of resources which can be directed towards providing a better hospital service? That is what he should be concerned with.
This is a modest measure directed to increasing the amount of resources available to the National Health Service. My question to my hon. Friend the Under-Secretary is this. Why is it so modest? I am not at the moment complaining about the level of charges. What I do not understand is why this system, which imposes hospital charges for certain classes of accident and by statute imposes them for all emergencies, produces so little revenue.
My understanding is that, even with these increases—the right hon. Gentleman said that it was 500 per cent., but I make it 600 per cent.—the charges will produce an extra revenue of £1·8 million. Let me relate that to the number of accidents. In 1978—the latest year for which I have figures—the total number of serious injuries and fatalities was about 89,000. In that year, 89,000 people were killed or seriously injured on the roads. Those are terrible figures, and hon. Members on both sides recognise that. In fact, the total number of all injuries, including many minor injuries not requiring hospitalisation, though a good proportion did, was about 350,000. In one way or another, 350,000 people were injured in road accidents.
Those are terrible figures. I shall not go into detail on the question of road


accidents now, but I cannot understand how, with that vast number of road accidents, so little was produced in revenue from what is, after all, a statutory charge.
It seems to me that this Government, and the previous Government, have something to explain in respect of the way in which these revenues are or are not collected. If they are to be applied by statute, they should be applied meaningfully.
I recognise that what I am about to say may not be popular with the industry with which I have had a long connection, the insurance industry—

Mr. Orme: Or with the RAC.

Mr. Moate: —or with the motoring organisations, with which also I have fairly close connections. Indeed, the motoring organisations and the insurance companies will complain bitterly at the idea that motorists should be charged twice—through tax and insurance contributions and again through hospital charges—if they are involved in accidents. But it seems to me that at a time when all of us, including the Opposition Front Bench, should be concerned to raise extra revenue to improve our hospital services, we should look wherever we can for substantial extra revenues for that purpose.
If the accident statistics are as I have described them, putting such a colossal burden on the Health Service, it is not unreasonable to look at this as a means of raising revenue. As I see it, the figures we are talking about here are substantial —£1,250 for persons treated as in-patients and £125 for persons treated as outpatients—and if those sums were collected, as I suspect they are not being collected, whenever accidents of this kind occured, we should be talking about not £1·8 million of revenue for our Health Service but of tens of millions of pounds.
I know that the right hon. Members for Lewisham, East and for Salford, West (Mr. Orme) have immense experience of the health services, and have travelled around many casualty wards and accident centres. They know how much extra resources are needed if we are to provide first-class casualty centres. They know how much those extra tens, and perhaps even hundreds, of millions of pounds

could be used to provide better hospital services.
Why should we not look to the insurance companies and the motorists to provide that extra revenue? That is certainly an area that we ought to examine. It is certainly an area where we ought to demand that the statutes are applied properly. That means up-rating the returns so that they accord with what has happened because of inflation.
I had assumed, wrongly I think, that Labour Members had tabled this prayer in order to secure a wide-ranging debate. But, in view of the almost empty Labour Benches, it is clear that that is not their objective. They are seeking a vote. They are voting against the effects of legislation, which is an extraordinary proposition, and they are voting against extra revenues to the Health Service, which is another extraordinary proposition.
I hope that my hon. Friend will persevere in securing the extra revenue that is available by the order for the benefit of our health services. I hope that he will go further. Despite the scepticism and opposition that will be mounted by the motoring organisations and the insurance companies, which I may be upsetting tonight, I hope that he will examine this whole question to see whether we can, through the insurance principle, secure more revenues to our health services, and hospitals, whether through motoring accidents, industrial accidents or wherever else the insurance principle can be used. We should spread the cost so that it dos not fall heavily on the individual but falls across the whole range of the insurance system. Through that method, we might be able to secure the revenues which would be of so much benefit to all the people of this country.
I pointed out that in 1978, the last year for which I have accident statistics, about 89,000 people were seriously injured or killed. The motoring insurance premium was well over £1 billion, whereas the amount about which we are talking is £1·8 million. I am sure that Labour Members will realise that there is tremendous scope within that system for finding extra revenues for our deprived health services. I find it strange that the Opposition should be voting against the order. It is short-sighted and, I suspect, ideological. I am very sorry


about that, because we should be looking for extra ways of helping our health services. Above all, it is better hospitals and casualty centres which the motoring organisations, insurance companies and the people of this country are after. I suspect that within this rather modest order we could find the seeds of something far more substantial. We should look to it to find ways of expanding the resources for our health services.

Mr. Iain Mills: When I look at article 3, I find it strange that Labour Members should even have considered a prayer against the order. I should like to bring to their attention a heart-felt plea brought to me by Dr. Farn of Atherstone, who is one of my constituents. He pointed out the difficulties of doctors who, under article 4, are asked to go out late at night to deal with road accidents. The amount of money that is paid to those doctors under article 3 of the present regulations is so extraordinarily small as to defy belief.
My constituency contains the M6 and a large part of the A5. We are asking doctors to answer emergency calls for a fee of £1·25
for emergency treatment of traffic casualties and a sum of 2½ new pence for each mile".
Is it suggested that it is unreasonable to offer these gentlemen £6·75
and for the sum of 2½ new pence there shall be substituted the sum of 16 new pence"?
These sums are even less than those given to hon. Members for carrying out their duties. If a doctor is summoned under paragraph 4 to
an accident giving rise to … death or bodily injury
he should receive at least the same payment that hon. Members receive for carrying out their duties. It seems inconceivable that there should be a prayer against article 3.
If we wish doctors to provide medical services and to carry them out reasonably at all times of the day and night, the order seems only reasonable.
I understand that the motoring organisations may be concerned about the double payment factor. However, realities have to be accepted. If we wish there to be the right sort of medical treatment for the users of our crowded

roads, we shall have to pay. This is a most reasonable measure.

Mr. Ronald W. Brown: I have heard some extraordinary speeches. The hon. Member for Faversham (Mr. Moate) talks about £1·8 million, but it is up to him to explain how his scheme will work. Those of us who have had some experience in hospitals are aware of the problem of trying to recover costs. If the hon. Gentleman considers the amount of effort that is being devoted to recovering the money that should have been paid by private fee-paying "passengers" for private treatment, he will understand some of the problems. The hon. Gentleman knows how it is necessary to chase after Arabs to get them to pay their bills. They are private patients.
I trust that the hon. Gentleman will be able to tell me the cost to the hospital service in its efforts to get the bills paid by those who have chosen to have private treatment. How much of the £1·8 million will be spent by the hospital administration services to recover outstanding bills?

Mr. Moate: rose—

Mr. Brown: If that is to be done, there will have to be an increase in staff levels. The hon. Gentleman is arguing that the Health Service should be an income-producing service. If it is to be that sort of service, it will have to have the necessary personnel available. Hospital administration departments are in dire straits. They do not have sufficient staff to undertake the necessary work to help people get well. If the Service is to be a money-raising scheme, if it is to be some form of exchequer, the hon. Gentleman must agree to have an increased number of staff.
What is the anticipated increase in staff that the hon. Gentleman considers necessary to enable the Service to carry out the work to which he has referred? I have heard the order described as modest. Is it to cost £2 million to save £1·8 million? Indeed, the chances are that the money will not be collected. Is it not fraudulent of the hon. Gentleman to pretend that he will recover money from those who have been hurt—ghouls hanging around to determine the cost—when in fact he does not want to get it because that will entail the cost of the recovery?
It is no good the hon. Gentleman smiling. He knows that hospitals in my constituency are in a disgraceful condition. He knows that, yet he is helping to close them.

Mr. Moate: rose—

Mr. Brown: Hospitals are being closed because there are insufficient funds. The hon. Gentleman knows that £1·8 million throughout England and Wales will not save one hospital that he is helping to close in my constituency. Above all, it is fraudulent to suppose that there will be some influx into the Treasury's coffers. The hon. Gentleman knows that this is not so. He is attempting to satisfy his fellow Back Benchers by pretending that money will be gained.

Mr. Moate: I am afraid that the hon. Gentleman has flowed past the point at which I had wished to cross the river. However, he suggested that some Conservative Members had been put up to making these points. I feel that that is rather uncharitable. We are in very little collusion with the Government. Secondly, the hon. Gentleman said that money would be difficult to collect. This is a serious point. Does he not agree that the bulk of the money—if not all—should be collectable from British insurance companies? Surely he does not suggest that it would be more difficult to collect money from them than from certain clients from the Middle East. They may fly home when the treatment has finished. That money would benefit our constituents.

Mr. Brown: The collection of moneys will be just as difficult. Which insurance companies will pay? There will be arguments about who is directly responsible for the accident. Such arguments would apply particularly to serious accidents. Large sums of money are involved. Several vehicles may be involved in an accident. Many people may be hurt. Different insurance companies would then argue about responsibility. It will take a long time to get the "knock for knock" idea right.
Who will remind the insurance companies that it is time to cough up the money and to pay? How many insurance companies will a person have to write to? Surely the hon. Gentleman will agree that, if a section of a hospital has to deal with that, a substantial amount of work will be involved. The hon.

Member for Faversham drew our attention to the large numbers of people involved. He provided astronomical figures concerning the numbers of those killed and hurt in road accidents. He is right. A staggering amount of transactions will pass through our major hospitals.
Clerical assistance will therefore be needed. Further staff will then be required. We would need decision-makers. Who would make the decisions? Perhaps we will be told that area health authorities should make those decisions. Which columns in the area health authority's accounts will show the amounts that have been taken? How will the sums be paid? Whose account will they be paid into? How will the money be distributed? How will that affect "RAWP-"ing? Are we to understand that money will come in one way and go out another? Are we to understand that £1·8 million does not matter? A hospital may have to "RAWP" to another area. However, its resources could be used in this way. Who will get the money?
There are so many unanswered questions. This is a pathetic little order. Insufficient homework has been done. It is another burden on the backs of hospital staff. It will prevent a hospital from directing its efforts towards the improvement of health. I shall heartily vote against the order tonight.

The Under-Secretary of State for Health and Social Security (Sir George Young): It has so far been a modest little debate, and none the worse for that. I detect little enthusiasm on the Opposition Benches for the prayer that they have tabled this evening.
My hon. Friends the Members for Faversham (Mr. Moate) and for Meriden (Mr. Mills) swiftly demolished the argument put forward by the right hon. Member for Lewisham, East (Mr. Moyle). I propose to pick off one or two stragglers, and deal with the hon. Member for Hackney, South and Shoreditch (Mr. Brown), whose imagination ran away with him.
I can say straight away that no extra administrators are required by the order. There will be no extra burden on the Health Service. We are merely updating the amounts collected through the existing system. The prayer will simply deprive the NHS of resources.
I am well aware that the principle of charging for treatment following a traffic accident is controversial and, on occasions, the subject of misunderstanding by both the public and the media. I am therefore glad to have this opportunity to debate the order and deal with the points raised. The law is a little complex in this field and I believe that it will be helpful to set out briefly the legal provisions and clarify the extent to which charges are actually collected by the NHS following road traffic accidents, which was a point raised by my hon. Friend the Member for Faversham.
Sections 154 and 155 of the Road Traffic Act 1972 consolidate earlier legislation and provide for payments to be made for the medical treatment of persons injured in road accidents. Section 154 provides that where an insurance company has made a payment in respect of a person killed or injured in a road traffic accident and, to the company's knowledge that person has received treatment at hospital, the insurers and not the individual are required also to make a payment to the health authority in respect of the cost of in-patient and out-patient treatment within statutory limits, so the saga about the Arabs simply does not arise.
Such payments are based on the motorist's insurance company having made a payment to the person injured, and do not cover the costs of treatment of the driver of the vehicle that caused the injury.
As a result, recovery is effected only in about 20 per cent. of the total number of cases of road casualties. I believe that that explains the discrepancy mentioned by my hon. Friend the Member for Faversham. The scheme is therefore not applicable to all road accident casualties. Payment for hospital treatment costs applies only where third party compensation payments have been made by insurance companies.
Furthermore, the Act provides for charges to be made within well-defined limits. There is no open-ended commitment. Only the actual cost of treatment is recovered.
Currently these limits are £200 for inpatient treatment and £20 for out-patient treatment—maxima that are now hopelessly

out of date. The order seeks to raise these limits to £1,250 and £125 respectively. Those are not arbitrary figures but restore the purchasing power in terms of the amount of treatment which the present limits gave more than 10 years ago.
There are certain exemptions from making payments, and, as the Act allows for the owner of the vehicle to opt to bear his own liability, in well-defined circumstances it will sometimes be the owner and not the insurer making the payment. However, such cases are comparatively exceptional, and for the purposes of the debate I shall refer to the payer being the insurance company.

Mr. Moate: I am not sure that I am convinced by my right hon. Friend's answer. What is the total revenue at present from that source? If it is as low as I suspect, judging by the figures given, is my hon. Friend satisfied that it is even being collected in those places where it ought to be?

Sir G. Young: I shall be coming to the figures that my hon. Friend asks for in a moment.
Turning to section 155 of the Act, this does not involve any question of guilt or negligence. In consequence, I am aware that that aspect is especially unpopular with motorists, although I believe that it is normal for insurers to make the payment without effect on the "no claims" bonus.
The section provides for the payment of a fee, known as the emergency treatment fee, which my hon. Friend the Member for Meriden referred to, by the person using the motor vehicle in respect of each person given emergency treatment in a hospital. If a doctor gives such treatment at a road traffic accident, the fee is claimable by him and not the hospital. The section also enables the doctor to claim a mileage allowance from the vehicle user in respect of any distance travelled in excess of two miles. Where the emergency treatment fee is payable and the driver of the vehicle is not responsible for the accident, it is always open to him to seek to recover the payment from the other person. The Act requires all motor insurance policies to cover payments for emergency treatment. We wish to increase the fee from £1·25 to £6·75 and raise the mileage rate that the


general practitioner can claim from 2½p to 16p per mile.
Let us be absolutely clear what the order we are debating is intended to do, so that we can get the matter into perspective. We are merely seeking to increase the limits for in-patient and outpatient charges and to increase the emergency treatment fee and mileage rate to a realistic level. Both the fee and the limits have remained unchanged for more than 10 years, while the mileage rate which general practitioners can claim from the user of the vehicle still stands at 2½p, a rate which has remained unchanged since 1934. The increases that we wish to make do nothing more than bring the limits up to date.

Mr. Ronald W. Brown: Am I to understand that the death grant, which has remained unchanged for many years, will be increased immediately?

Sir G. Young: The death grant has been debated in extensor in Committee.
These charges, therefore, are not new. Indeed, some of them have been with us for 50 years. The provision for hospitals to recover from insurance companies the treatment costs of road traffic accident casualties dates back to the Road Traffic Act 1930. The emergency treatment fee was introduced for the first time in 1934 and the Labour Government continued the charges on the inception of the NHS. The weakest section of the speech of the right hon. Member for Lewisham, East (Mr. Moyle) was when he tried to explain how that anomaly had been overlooked for 35 years by successive Labour Governments.
Successive Governments have upheld the principle of motorists continuing to contribute to the NHS costs of treating road traffic accident casualties. Apart from the updating by the Labour Government in 1968, the scheme has remained unchanged since the 1930s. The failure over the past 10 years or so to update means that the limits are badly out of date, while the costs of collection have increased considerably. Clearly that is an unsatisfactory position and one which we feel must be put right.
On coming into office we reviewed a number of different charges and found that one to be particularly badly out of date. We notified the insurers, the motoring

organisations and the British Medical Association of our intention to increase the level of charges from the beginning of the next financial year, 1 April 1980. That, we felt, would give the insurers ample time to make any adjustments to premiums that they felt were necessary. In response, the motor conference, on behalf of the insurers, reiterated its view that it objected to the charges in principle, mainly on the grounds that the motorist pays twice for NHS treatment in these circumstances, both through taxation and through insurance premiums.
Some of the motoring organisations also made strong objections in principle to the charges, again because of the motorist being singled out and paying twice, and also because of the heavy burden of taxation currently levied on motorists. I can well understand the wish of the motoring organisations to protect their members' interests. That is, of course, commendable. The Government's view is that the principle of requiring motorists to make a contribution to NHS costs has been long established and is perfectly reasonable. If the power is to be retained, the limits on charges must be set at a level which makes sense, and not be allowed to get so hopelessly out of date as has been the case in the past.
The uprating is part of a series of measures aimed at maintaining the levels of expenditure of the National Health Service despite the very grave economic problems we were bequeathed, and we have little option but to increase the charges to a realistic level. To fail to do so would be to risk a reduction in patient services.
The Automobile Association complained that the order would lead to a sixfold increase in charges. That is not the case, and the right hon. Gentleman made the same mistake. There is an important difference between charges and limits. If treatment costs less than the limit, that will be the amount charged. In many cases the order will enable hospitals to recover something more like the full costs of treatment in a larger number of cases
Any form of charging involves singling out those who pay from others who do not, and it has been claimed that those who pay charges pay twice. In paying charges they are paying separately for


one element of service cost, and are contributing through general taxation not to that element but to the rest of the service cost. Increasing the share met from charges, of course, reduces the amount to be contributed through general taxation. The proposed increase in charges is in line with our policy of recovering from users more of the cost of running the NHS. Any increase in insurance premiums should be modest—with £3 million extra income expected and 15 million vehicles on the road, simple arithmetic suggests that the cost will be 20p per motorist per year.
I should now like to deal with points which have been raised in the debate. Why single out the motorist for these charges? Motorists place a heavy bur-dent on the NHS. They are involved in accidents which result in death or injury not only to themselves but to others—some 94,000 passengers and 72,000 pedestrians in 1978. Most of the other high risk groups placing a burden on the NHS do not involve such a high chance of injury to others. Many such groups are comparatively small in number, and hence it would not be economic to seek to obtain a financial contribution from them. Furthermore, there is no legal obligation on them to be compulsorily insured as there is on motorists.
I am surprised that Labour Members are opposing the order which requires such a modest contribution to be made by motorists towards NHS costs of treating road accident victims. So convinced were the Opposition of the principle of charging motorists for NHS costs that they made an attempt in 1976 to ensure that the full costs of treating road casualties were recovered from motorists by means of a levy collected through insurers.
I refer to an answer given in February 1977 by the then Secretary of State who said:
In October last year I put forward as a basis for discussion with insurers and motoring organisations proposals for recouping the full cost to the NHS of treating road traffic casualties by a levy on individual motorists.
The Opposition's action tonight is sheer hypocrisy.

Mr. Moyle: Will the hon. Gentleman give way?

Sir G. Young: I shall give way in a moment. Subsequently the then Government announced that they proposed to drop the Road Traffic Casualties Bill because of administrative difficulties and costs of collection. The Secretary of State's parliamentary answer in which that information was contained went on:
I have therefore withdrawn the proposals and do not now intend to meet this cost by a levy."—[Official Report, 14 February 1977; Vol. 926, c. 46.]
There was no objection to the principle of taxation of the motorist. Our order will bring in a mere £4 million in a full year. The Opposition when in government were seeking to introduce a scheme which would currently be recovering £50 million or £60 million from motorists. Their approach tonight is strangely inconsistent. If they feel that the motorist is overburdened by taxation, why did they not seek to reduce the charges when they were in office?
To sum up, the income from the charges, although modest, provides the NHS with money that it can ill afford to lose. The principle of requiring motorists to contribute towards the heavy burden that they place on health services is one which goes back nearly 50 years and has been accepted by successive Governments since the 1930s. The level of charges is now well out of date and we simply wish to bring it into line with 1980 costs.
Should the order be annulled, charges under the Road Traffic Act will continue, but we will be in the unfortunate position of maintaining charges which are collected from motorists at levels set in 1968 and in some cases even earlier. That is unacceptable, and I hope that the House will agree to the order.

Mr. J. W. Rooker: It is not surprising that the Government are a little upset that the Opposition have tabled the prayer, but we object to the order in principle. Some Conservative Members, including the hon. Member for Faversham (Mr. Moate), have argued that we ought to raise any charge that has been on the statute book for some time—indeed, the hon. Member advocated more and higher charges for those using the NHS—but that argument also applies to the dog licence. May we expect the Chancellor of the


Exchequer to raise the 37½p dog licence to £5 or £6 in the Budget? No Chancellor has yet had the courage to take that step.
The hon. Member for Meriden (Mr. Mills) said that doctors were hard done by in having to visit the victims of road accidents, but doctors do not get extra pay for visiting accident victims in factories. They get general charges for running their practices. We reject that sort of special pleading.
The order is clearly the thin end of the wedge. As my right hon. Friend explained, the provision was left on the statute book in 1946 more by oversight than by design. The Government are reviewing all the charges that they can make within the NHS—contrary to their election manifesto—and will seek to introduce new charges and increase existing charges. We will oppose them all the way.
It does not matter what tripe we hear from the Tories about the actions of the previous Labour Government. We are in a different position from May last year. Some of us are not ashamed to quote the manifesto on which we fought the election. It is the policy of the Labour Party to abolish all Health Service charges. That was put to the electorate last May and remains the policy of the Labour Party in Opposition. I do not accept that motorists should be singled out. There has been no logical argument for saying that the cost of motor accidents should be treated differently from home accidents. Far more accidents occur in the home than on the road.
The National Health Service has to fork out £85 million-plus to treat smoking-related illness. The Government have not produced that argument. It is not fair to say there is a tax on tobacco. Those dying of lung cancer in hospital are not specially charged. Perhaps that is a loophole that the hon. Member for Faversham will bring forward for support.
It is estimated that 50,000 to 80,000 a year die as a result of smoking-related diseases. That is almost the same number, as hon. Members on the Government side of the House have indicated, of people who die as a result of road accidents. The same arguments do not apply.

The Government are singling out the motorist. I acknowledge what the Minister stated. The motoring organisations are not happy. Insurance companies are not happy. The hon. Gentleman slipped out the remark that this order would be introduced in plenty of time for the insurance companies to adjust their premiums. He did not use the words "raise their premiums". But the companies will not lower their premiums following this imposition.
Insurance companies will not put up the premium by the minimum necessary to conform with the order. They will see an excuse for a general increase in motor premiums which will act as a further ratchet on the price inflation brought about by the Government.
I am not surprised that the Minister referred to the levy proposed by the previous Labour Government. It was not actually proposed. It was put to that Government by the same people—we should make no bones about this—who put it to the present Government, the Treasury, which is looking for every possible increase in charges. The Minister laughs. Is he saying that extra money raised by the order will not be deducted from the cash limits available to the National Health Service?
There will be no extra money for the National Health Service from this order. The Treasury mandarins will see to that. It is dishonest of the Minister not to put that point to the House.

Mr. Ronald W. Brown: Will my hon. Friend also consider the case of people who undertake boat races in bad weather with the consequent calling-out of enormous resources? Are we to understand that there will be a miserable little Bill or order to deal with those effects?

Mr. Rooker: My hon. Friend gives another example. Hon. Members could give umpteen different examples of various types of accident for which people do not go looking. Some are due to natural disaster. But no extra charge is imposed for use of the National Health Service. It is hypocritical of the Government to take this step.
The suggestion of a levy was thrown out by the previous Labour Government. It was never put before the House. It was withdrawn. The Opposition fought


the last general election on the pledge of abolishing all Health Service charges. We include in that pledge prescription charges and this charge. The previous Government allowed the charge over the last five years to be eroded by inflation. It was becoming next to worthless.
Our objective is not only to oppose the order. My right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) has tabled for the Standing Committee on the Transport Bill new clause 7 to abolish the statutory provision under which the Minister brings forward this order. We are root and branch opposed to two-tier charges in the NHS whether for road accidents or anything else. The Government should take fair warning. They are

pledged to increase Health Service charges by any conceivable means, whether through new or extra charges for the doctor or hotel charges for hospitals. These will be put before the House in the long run. It is also likely that there will be deductions from pensions when pensioners receive treatment in NHS hospitals. We shall oppose every increase in NHS charges.

It is no good Ministers describing what happened in the past. Things changed in May 1979. When a Labour Government are returned we shall fulfil our pledge.

Question put:—

The House divided: Ayes 66, Noes 119.

Division No. 209]
AYES
[11.15 pm


Anderson, Donald
Field, Frank
Moyle, Rt Hon Roland


Ashton, Joe
Flannery, Martin
Ogden, Eric


Atkinson, Norman (H'gey, Tott'ham)
Fletcher, L. R. (Ilkeston)
Orme, Rt Hon Stanley


Barnett, Guy (Greenwich)
Garrett, W. E. (Wallsend)
Penhaligon, David


Bray, Dr Jeremy
Graham, Ted
Powell, Raymond (Ogmore)


Brown, Ronald W. (Hackney S)
Hamilton, James (Bothwell)
Prescott, John


Callaghan, Jim (Middleton &amp; P)
Hamilton, W. W. (Central Fife)
Race, Reg


Campbell-Savours, Dale
Harrison, Rt Hon Walter
Radice, Giles


Clark, Dr David (South Shields)
Haynes, Frank
Roberts, Ernest (Hackney North)


Cocks, Rt Hon Michael (Bristol S)
Home Robertson, John
Rooker, J. W.


Cook, Robin F.
Homewood, William
Ross, Stephen (Isle of Wight)


Cryer, Bob
Lamond, James
Sever, John


Cunliffe, Lawrence
Leadbitter, Ted
Soley, Clive


Davis, Terry (B'rm'ham, Stechford)
Litherland, Robert
Spearing, Nigel


Deakins, Eric
Lyons, Edward (Bradford West)
Summerskill, Hon Dr Shirley


Dean, Joseph (Leeds West)
McCartney, Hugh
Welsh, Michael


Dormand, Jack
McDonald, Dr Oonagh
Whitehead, Phillip


Dubs, Alfred
McKay, Allen (Penistone)
Wigley, Dafydd


Duffy, A. E. P.
Maclennan, Robert
Winnick, David


Eadie, Alex
McNamara, Kevin



Eastham, Ken
Marks, Kenneth
TELLERS FOR THE AYES:


Ellis, Raymond (NE Derbyshire)
Mitchell, R. C. (Soton, Itchen)
Mr. George Morton and


English, Michael
Morris, Rt Hon Charles (Openshaw)
Mr. James Tinn.


Evans, John (Newton)






NOES


Alexander, Richard
Cockeram, Eric
Hunt, David (Wirral)


Alison, Michael
Cope, John
Jopling, Rt Hon Michael


Beaumont-Dark, Anthony
Dickens, Geoffrey
Knight, Mrs Jill


Best, Keith
Dorrell, Stephen
Knox, David


Bevan, David Gilroy
Douglas-Hamilton, Lord James
Lawson, Nigel


Biggs-Davison, John
Dover, Denshore
Le Marchant, Spencer


Blackburn, John
Dunn, Robert (Dartford)
Lennox-Boyd, Hon Mark


Blaker, Peter
Edwards, Rt Hon N. (Pembroke)
Lester, Jim (Beeston)


Boscawen, Hon Robert
Elliott, Sir William
Lloyd, Peter (Fareham)


Bowden, Andrew
Eyre, Reginald
Lyell, Nicholas


Boyson, Dr Rhodes
Fairgrieve, Russell
MacKay, John (Argyll)


Braine, Sir Bernard
Fenner, Mrs Peggy
Major, John


Bright, Graham
Fookes, Miss Janet
Marlow, Tony


Brinton, Tim
Fowler, Rt Hon Norman
Marshall, Michael (Arundel)


Brocklebank-Fowler, Christopher
Garel-Jones, Tristan
Marten, Neil (Banbury)


Brooke, Hon Peter
Gorst, John
Mather, Carol


Brotherton, Michael
Griffiths, Peter (Portsmouth N)
Maude, Rt Hon Angus


Brown, Michael (Brigg &amp; Sc'thorpe)
Grylls, Michael
Maxwell-Hyslop, Robin


Bruce-Gardyne, John
Gummer, John Selwyn
Meyer, Sir Anthony


Bulmer, Esmond
Hamilton, Hon Archie (Eps'm&amp;Ew'll)
Miller, Hal (Bromsgrove &amp; Redditch)


Carlisle, John (Luton West)
Hannam, John
Mills, Iain (Meriden)


Carlisle, Kenneth (Lincoln)
Hawkins, Paul
Moate, Roger


Carlisle, Rt Hon Mark (Runcorn)
Hawksley, Warren
Monro, Hector


Chalker, Mrs. Lynda
Heddle, John
Montgomery, Fergus


Chapman, Sydney
Henderson, Barry
Morrison, Hon Charles (Devizes)


Clark, Sir William (Croydon South)
Hicks, Robert
Morrison, Hon Peter (City of Chester)


Clarke, Kenneth (Rushcliffe)
Hogg, Hon Douglas (Grantham)
Myles, David




Neale, Gerrard
Rhodes James, Robert
Trippier, David


Needham, Richard
Rhys Williams, Sir Brandon
Wakeham, John


Newton, Tony
Sainsbury, Hon Timothy
Waldegrave, Hon William


Normanton, Tom
St. John-Stevas, Rt Hon Norman
Waller, Gary


Page, Rt Hon Sir R. Graham
Skeet, T. H. H.
Ward, John


Parris, Matthew
Speed, Keith
Watson, John


Patten, Christopher (Bath)
Speller, Tony
Wickenden, Keith


Patten, John (Oxford)
Spicer, Jim (West Dorset)
Williams, Delwyn (Montgomery)


Pattie, Geoffrey
Stainton, Keith
Wolfson, Mark


Pollock, Alexander
Stevens, Martin
Young, Sir George (Acton)


Price, David (Eastleigh)
Stradling Thomas, J.



Proctor, K. Harvey
Tebbit, Norman
TELLERS FOR THE NOES:


Raison, Timothy
Thompson, Donald
Mr. John MacGregor and


Rathbone, Tim
Thorne, Neil (Ilford South)
Mr. David Waddington.

Question accordingly negatived.

Mr. MICHAEL CARROLL (MOBILITY ALLOWANCE)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boscawen.]

Mr. Arthur Davidson: I want to raise tonight the case of Mr. Michael Carroll, one of my constituents, who has many times been refused mobility allowance. He is a brave, honourable, uncomplaining and hard-working man, who lost both his arms and both his eyes in an explosion 20 years ago. He is unable to get out of his house on his own. Because of his particularly appalling disabilities, he cannot manage a guide dog, neither can he hold a white stick. Yet he has so managed to adjust to his disabilities as to be able to work as a telephone operator.
Most men suffering the injuries that Mr. Carroll has suffered would have given in under the strain. He has not done so. He is greatly helped by his wife, who takes him to and from work, but this means that she has to make eight separate journeys every day, and it is obviously a great strain to her, and it affects her own business as a hairdresser.
Mr. Carroll would be exactly the right sort of person to benefit from mobility allowance, because he could use it to employ someone to help him get to work and to get about. But he has been turned down no fewer than three times. He has been to a medical board on three occasions and has appealed to the medical appeal tribunal on three occasions, and each time, since early 1978, he has been refused. The last time was in January this year. The reason is that he is not considered virtually unable to walk, which is the definition in regulation 3 of the mobility allowance regulations 1975 as amended by the 1979 regulations.
The irony is that everyone has sympathy for Mr. Carroll. The appeal tribunal that turned him down on three successive occasions has sympathy for him, as have the past and present Ministers with responsibility for the disabled—my right hon Friend the Member for Manchester, Wythenshawe (Mr. Morris) in the last Government and the right hon. Member for Daventry (Mr. Prentice) in the present Government—yet both have been unable to intervene. I acquit both of lacking in compassion or of not wishing to help Mr. Carroll. Certainly, there is no one with more compassion than the Under-Secretary of State who is to reply to this debate. If he were in my position he would be making exactly the same speech and exactly the same plea as I am making.
My right hon Friend the Member for Wythenshawe when he was Minister wrote to me a letter dated 19 April 1978. Even before then Mr. Carroll had been battling. The letter says:
You came to see me in the House on 6 April, further to your letter of 28 March, on behalf of Mr. Michael Carroll of 69 Plantation Street, Accrington. At our meeting you argued very strongly to me Mr. Carroll's case for the mobility allowance. As I explained, I recognise Mr. Carroll's very considerable difficulties and I would like nothing better than to he able to help. My difficulty, however, is that appeals are decided not by Ministers, but by independent adjudicating authorities appointed by Parliament. The disallowance of Mr. Carroll's claim for mobility allowance follows a decision of the national insurance commissioner. He is the highest of the independent adjudicating authorities who are responsible for deciding claims and, under the law, I have no power to set aside his decision. As I say, he is an independent person appointed by the Crown for the purpose of deciding claims.
My right hon. Friend went on to suggest that Mr. Carroll should apply again. He did so and was again turned down. He applied again recently; and I shall read a letter which I received from the present Minister with responsibility for the disabled. It says:


Thank you for your letter of 4 June on behalf of Mr. Carroll…I am very sorry indeed to hear of his misfortunes. I am afraid, nevertheless, that the interpretation of the medical conditions for mobility allowance, and their application to individual cases, are entirely matters for the independent adjudicating authorities, specially appointed for this purpose. I cannot intervene to influence or set aside their decision…The tribunal will be considering the appeal in the light of the mobility allowance amendment regulations which came into operation on 21 March.
These regulations improved the definition of 'virtually inability to walk' by explaining the kind of factors to be taken into account as limiting a claimant's ability to walk out of doors. These include the distance achieved, and the speed, length of time and manner in which progress can be made without severe discomfort. It will be for the medical appeal tribunal to decide whether Mr. Carroll is 'virtually unable to walk' within the meaning of these regulations.
I am afraid that, once again, Mr. Carroll was turned down by the medical appeal tribunal. It said:
There can be no doubt that he is not unable to walk.
At the end of the report, members of the tribunal said:
We have been invited to say"—
by me—
that the definition is too narrow and makes a mockery of the whole concept of mobility allowance. But, whether we approve or not, we hold ourselves bound by the wording of the regulations, and having given attention to each of the matters in regulation 3(1)(b) as amended, we regretfully must say that the claimant is not virtually unable to walk. If, as the claimant submits, the intention was that a person such as the claimant should receive the allowance, then the regulations should have been drafted differently. It is not for us, out of the sympathy which we undoubtedly have for the claimant, to treat the regulations as saying something which they do not say.
Although Mr. Carroll is unable, on any layman's definition, to walk, or "virtually unable to walk", he is still unable to claim mobility allowance. Members of the public would certainly think that someone suffering Mr. Carroll's appalling disabilities, and who has sought to overcome them in such a praiseworthy fashion, should be entitled—if anyone is—to mobility allowance. Most people would say that he was just the sort of person for whom the allowance was introduced. I do not expect the Minister tonight to say that he can grant this allowance where others have failed. I know that it is not within his power. What I do ask is that he has another look at the regulations to

see whether they can be reviewed and overhauled so that a new definition can be brought in, enabling people like Mr. Carroll—who has done all that could reasonably be expected of him to make a decent life—to benefit. If he does that, Mr. Carroll himself will be able to benefit—he is only 49 years of age now—and many others who suffer similar disabilities and who are at present disqualified from receiving mobility allowance will be able to benefit.
I hope that the Minister will say that he will very carefully consider the deficiencies of the regulations and the shortcomings of the definition and that soon we shall have the benefit of new regulations which will enable the mobility allowance to be given to many of those whom the House would certainly feel should receive it and enable someone like Mr. Carroll to benefit.

The Under-Secretary of State for Health and Social Security (Sir George Young): The hon. and learned Member for Accrington (Mr. Davidson) has for some time now diligently and forcibly supported the claim to mobility allowance of his constituent Mr. Michael Carroll. Tonight he has restated the case with clarity and compassion. Everyone who has heard the details of the case will have the very greatest sympathy with Mr. Carroll's very considerable difficulties, and, if I may say so, he could not have a better advocate than the hon. and learned Gentleman.
Mobility allowance, as the House is aware, is a taxable non-contributory benefit for disabled people aged 5 to 64 inclusive who are unable, or virtually unable, to walk because of physical disablement. It was increased last November to a rate of £12 a week.
The regulations covering the qualifying conditions for the benefit were expanded and improved last year to spell out the kind of factors bearing upon an individual's inability to walk out of doors. These included the distance achieved, the time taken and the speed and manner of progress, together with any question of severe discomfort. It has always been the case that account has been taken of the effects of any exertion occasioned by walking which place the claimant's life or health in jeopardy.
It is a factor of the mobility allowance scheme that the interpretation of the


medical criteria for eligibility and their application to individual claims are entirely in the hands of independent adjudicating authorities statutorily appointed for this purpose. There are three levels of adjudication: the first is the insurance officer; then, on appeal, the medical board; and finally, and again on appeal, the medical appeal tribunal. On points of law arising from a medical appeal tribunal decision, a case can be taken to the national insurance commissioner.
We do, in fact, encourage every disabled person who thinks he may be able to satisfy the medical conditions to claim. This enables the independent adjudicating authorities to consider the question of eligibility. They can, and do, use their own medical expertise to come to a decision on the evidence before them. It is, of course, always open to them to call for additional medical evidence, for example from the claimant's own doctor or from a hospital consultant, if necessary.
In Mr. Carroll's own case there was on file evidence of the difficulties with which he has to contend and of the courageous way he has sought to minimise them. He has, in fact, successfully held down a job as a telephonist in circumstances which might cause many people to give up the struggle. He is a brave man and he has deservedly attracted great sympathy for his plight. I take this opportunity to express my admiration and sympathy for him. He is one example of the many disabled people who struggle daily against great odds to prove that what matters is not their handicap but what they can achieve. I must also pay tribute to Mrs. Carroll, who has devoted herself to helping her husband ever since his accident. The care and attention she has given are beyond praise.
I have listened carefully to all the points the hon. and learned Member has made and it seems to me that the issue really falls into two parts: have the two claims to mobility allowance made by Mr. Carroll been decided correctly within the present law; and, if so, is there anything that can be done about it?
Mr. Carroll's first claim was considered by all the independent medical authorities statutorily appointed to decide these claims and eventually was put to the national insurance commissioner, the highest authority on points of law in this

field. The commissioner considered that if the medical authorities found that a claimant was able to walk with assistance or support then, whether or not he was able to walk without such support, they could not find that he was, in law, unable or virtually unable to walk, unless the exertion required was found to constitute a danger to his life. Against that background he concluded that the earlier decision by the medical appeal tribunal was erroneous in law. As a result of the commissioner's decision the claim was referred back to a medical appeal tribunal. It decided that Mr. Carroll was not unable or virtually unable to walk. A second claim was subsequently made and this was considered by the insurance officer, then by a medical board and finally by a medical appeal tribunal. All of them decided that Mr. Carroll was not unable or virtually unable to walk.
I must re-emphasise the independence of the adjudicating authorities dealing with claims to mobility allowance. Their function, which is inquisitorial rather than adversarial, is to reach a proper decision within the law—not simply to justify the decision given originally. I am advised that the decisions of the statutory authorities in the case of Mr. Carroll undoubtedly appear to be correct within the law as it stands.
It has never been argued that Mr. Carroll is unable to walk. He can and does walk. What has been in question is whether he might be considered to be "virtually" unable to walk because, when walking out of doors, he needs assistance. The term "virtually unable to walk" was recently redefined in the Mobility Allowance Regulations 1979.
The medical appeal tribunal which considered Mr. Carroll's second claim stated:
we have considered carefully whether the physical condition of the claimant as a whole is such that he is virtually unable to walk within the terms of Regulation 3 of the Mobility Allowance Regulation 1975 as amended by Mobility Allowance Regulation 1979.
It concluded that Mr. Carroll's claim did succeed and it emphasised that the assistance he required out of doors was not for support but by way of guidance. The Secretary of State in his submission to the tribunal had emphasised that, if Mr. Carroll required support, in the view of the Secretary of State the claim


should succeed. However, the tribunal has concluded that the help he requires from his companions is for guidance and not for support.
I have stressed the independence of the statutory adjudication authorities which decide claims for mobility allowance. It has always been the case in the national insurane scheme, since 1948, that Ministers should not have the power to decide whether any individual is to be allowed benefit. I am sure the House will appreciate the reasons for this. But it means that neither the Secretary of State nor any of his colleagues can overturn the decisions made by these authorities. This has always been so. The case of Mr. Carroll was presented with vigour by the hon. and learned Gentleman to the previous Minister with responsibility for the disabled, the right hon. Member for Manchester, Wythenshawe (Mr. Morris). He, too, was sympathetic to Mr. Carroll, but equally he was bound by the rules and could not interfere in a decision properly arrived at.
The hon. and learned Gentleman has suggested that the rules have been construed too rigidly. Whatever its name might imply, mobility allowance has been statutorily defined as catering for those who are unable or virtually unable to walk. If it had been intended to cater for people who suffered from mobility problems of one sort or another, the legislation would undoubtedly have been framed differently.
Indeed, we all know that many groups have pressed since the allowance was introduced for an extension of its scope to cater for people with these very problems—people who are blind, those suffering from epilepsy, the mentally ill, and hyperactive children, for example. However, the allowance was clearly designed from the outset for people who were unable or virtually unable to walk.
It has been argued that the term "virtually unable" was originally meant to cover people such as Mr. Carroll. But that could be so only if the original intention was to include everyone who was unable to walk unattended or who needed an escort to do so. That was not the case, and as early as 1976 the national insurance commissioner made that very clear. The commissioner said that

what 'virtualy unable to walk' means is a question of law, and in my view it means unable to walk to any appreciable extent or practically unable to walk".
In Mr. Carroll's case there is no evidence to suggest that he cannot walk; the question which has been raised is whether the assistance he needs in walking is for guidance. The tribunal considering his case thought that it was and went on to say:
It is not for us, out of the sympathy which we undoubtedly have for the claimant, to treat the Regulations as saying something which they do not say.
I am afraid, therefore, that Mr. Carroll, like a number of other severely disabled people, does not satisfy the statutory conditions for the receipt of mobility allowance. His need for attendance is, however, recognised by the award of an attendance allowance at the highest rate—which is now £18·60 a week.
There is a great deal of pressure on the Government to extend the scope of mobility allowance in a number of ways. We accept that at present it gives help only to those who are unable or virtually unable to walk. But we recognise that there are people who can walk but still have mobility problems. Mr. Carroll is an example of this situation.
We could, however, provide the help needed to such groups only if we were to extend the scope of the allowance, and in the present economic climate we can make no commitment to such improvements in the foreseeable future. I assure the House that my right hon. Friend the Minister with special responsibility for disabled people is very much aware of the difficulties faced by many groups of disabled people, and he will take account of these when cash becomes available.
In their manifesto, the Government said that they would seek a more rational approach to the benefits for disabled people. Mr. Carroll's case demonstrates how the piecemeal approach to cash help can result in hard cases. A more comprehensive approach is what is needed if we are to avoid such problems. Improvements can come only when the economy is strong enough to bear the cost of new help.
But I hope that I can respond positively to the plea which the hon. and learned Gentleman made at the end of his speech.


I assure the hon. and learned Gentleman that I shall draw my right hon. Friend's attention to this case and ask him to bear Mr. Carroll's problems in mind when he is evaluating all the views about how we should proceed and how the existing

arrangements might be amended and improved.

Question put agreed to.

Adjourned accordingly at fourteen minutes to Twelve o'clock.